An influx of young families is seeking affordability, urban amenities and green space.
LOS ANGELES – Lyndsey and Sameer Lodha had their pick of cities to call home after Sameer, a former equities trader who’s now a hand surgeon, got several job offers upon completing his residency.
The couple passed on New York, where Sameer lived when he worked at Goldman Sachs, and San Francisco because both were too expensive. They chose Denver, moving into an apartment with their 16-month-old daughter in August. “We wanted green and outdoor space but we don’t want to live in the suburbs,” said Lyndsey, 34, an anesthetist. “Denver has both. Lots of open spaces, great school options and a very vibrant city life. And it’s affordable.”
An influx of young families in search of alternatives to the most-expensive U.S. coastal markets is fueling a real estate boom in Denver, where commercial-property spending and home prices have jumped to records.
Apartment and office developers seeking to capitalize on employment growth are creating an urban center that has “started to compete very well against other higher-tier cities,” said Steve Ferris, development services director for the city and county of Denver.
Spending on construction of new commercial buildings this year is estimated about $2.55 billion, up 26 percent from 2012 and the most in at least two decades, according to the city Community Planning & Development Department.
New York and San Francisco will remain far bigger commercial real estate markets. But for some investors and would-be residents, Denver is becoming attractive because of its cheaper costs and growing downtown, said Christopher Frampton, a partner at Avon, Colo.-based developer East West Partners.
“What’s working for Denver is that it’s less expensive than San Francisco and New York, but that at the same time it has a growing and diverse industry — mutual funds, natural gas, technology,” Frampton said. “Denver now has a vibrant downtown. It never used to. So now you have a true mix of city and sky.”
East West, which has Starwood Capital Group founder Barry Sternlicht as an equity partner on its downtown projects, has 575,000 square feet of office, residential and retail real estate under development in the Union Station and Riverfront Park neighborhoods.
The city’s expanding young population is a boon for apartment developers, according to Frampton, whose company has built at least 10 residential projects in downtown Denver. Equity Residential called the Mile High City one of its top three growth markets for 2014.
Of the top 25 U.S. metropolitan areas, Denver was tied with Seattle for the third-biggest increase in 25- to 34-year-old residents from 2008 to 2012, data from the Census Bureau and Moody’s Analytics Inc. show. The 9.1 percent gain trailed only Washington (12 percent) and Baltimore (9.6 percent). Los Angeles and New York were among areas with the smallest increases in that age group.
Colorado is home to some of the nation’s most popular skiing destinations, with Vail and six other resorts no more than a two-hour drive from Denver’s center. The city’s restaurant scene is also a draw. Rioja’s executive chef, Jennifer Jasinski, was a 2013 James Beard award winner and a finalist on the Bravo network’s “Top Chef Masters” cook-off show. Art galleries, bars and nightclubs dominate the LoDo neighborhood.
The city is attracting young companies seeking an educated workforce, according to Ferris. DaVita HealthCare Partners Inc., the country’s second-biggest dialysis provider, relocated its base from Los Angeles in 2010, lured by Denver’s affordability, diverse talent pool and accessible mass transit, said David Maughan, senior vice president of operations.
“We have found it’s much easier to recruit to Denver with lower taxes, lower cost of living and so many sunny days,” he said. “We were surprised at the number of people that chose to leave places like L.A. and other cities to move to Denver.”
The Denver area’s unemployment rate was 6 percent in October, according to the most recent figures from the Bureau of Labor Statistics, which aren’t seasonally adjusted. That was below 7.8 percent in the New York City metropolitan area and 7 percent nationwide.
Office rents in Denver averaged $20.08 a square foot in the third quarter, about even with their prerecession peak, according to brokerage CBRE Group Inc. By contrast, the national average is 11 percent less than the 2008 high of $31.19.
Sales of Denver office properties may reach $2.07 billion this year, up 18 percent from 2012 and the most since 2007, according to Real Capital Analytics Inc.