Metro Denver Economy: Stuck in Neutral?

In contrast to last month's report, non-farm employment in the metro area increased by 1,600 jobs between August and September. Total employment is down by 16,700 positions for the first three quarters of 2003.

The chamber's November report shows that nine indicators moved in a positive direction, up from seven in October. Five indicators remain in positive territory for the year. Those nine indicators are distributed throughout four categories of data featured in the monthly report, which include labor and employment, the consumer sector, residential real estate and commercial real estate.

Of particular note is the continuing drop in the metro area's unemployment rate, which fell for the third month in row in September, retreating to 5.7%.

Year-to-date retail sales for 2003 also continued to strengthen in August. Total retail sales for the first eight months of the year are 1.3% higher than the same period last year. Indeed, total retail sales have increased in four of the seven counties. Broomfield County is basically flat, whereas Denver County is down 1.6% and Douglas County is down 5.4%.

As far as commercial real estate, the metro office vacancy rate decreased to 15.4% in the third quarter of 2003, down from 15.5% in the second quarter of 2003. The office vacancy rate including sublease space fell to 18%, down from 18.1%. The average office lease rate has dropped to $17.69 per sf, down from the peak of $21.56 reached in the first quarter of 2001.

The direct vacancy rate in flex buildings continues to increase at a strong clip. The direct vacancy rate increased to 17.3% in the third quarter of 2003, up from 16.5% last quarter. The vacancy rate for flex space is eight percentage points higher than the market segment's healthiest point in the fourth quarter of 2000 when vacancy was just 9.3%. Construction activity is virtually non-existent in this market segment with only about 60,000 sf currently being built in five buildings.

"We seem to be gradually headed in the right direction," says Denver Metro Chamber consulting economist Patricia Silverstein of Development Research Partners, who compiles the monthly report. "The strength of the national economy is good news for Colorado as the state recovery requires a growing national economy."

"The metro area economy could be slowly turning the corner, but it's too soon to say with any certainty that a recovery is eminent," says Tom Clark, EVP of Economic Development for the Denver Metro Chamber. "Strong economic development efforts are essential during this critical period. Now is the opportune time for all public and private entities to focus on promoting the Denver metro area as the best place in the nation to live and work."