As the multifamily industry ponders how to meet the housing needs of millennials and baby boomers, Colorado is facing two very different demographic paths looking forward. How we recognize and react to the needs of these population groups will have a major effect on the health of our state in future years to come.
Things are good right now in Colorado. We were the second-fastest growing state in 2015, according to the census bureau. U.S. News and World Report ranked Denver first and Colorado Springs fifth in its 2016 Annual Best Places to Live rankings.
Communities up and down the Front Range consistently are ranked in the top tier of best-in-class lists. The appeal of Colorado’s outdoor lifestyle, highly educated and healthy population, agreeable weather pattern and diversified economy are attracting companies and members of the millennial generation.
At 34, I am one of the older members of the millennial generation. I wanted to share a millennial perspective and some conversations I recently had with my more experienced and wise baby-boomer partner, Tom Wanberg, regarding demographics and Denver’s destiny.
Demographic trends and what the future holds have been popular topics of conversation lately. I approached Wanberg with my comment that people have never seen this many cranes in Denver. The marketplace, the press and all sorts of experts have been anxiously trying to predict if millennials will keep coming. Will millennials move out of their parent’s homes and will they have wage growth to support the luxury apartment construction going on?
As to baby boomers, what do they want? Will they downsize and move into smaller homes, condos or apartments? Will they migrate to Denver to be closer to their grandkids? Will they want downtown convenience or golf-course living in the suburbs?
“Sometimes it’s best to move out of the trees and get in the airplane to reassess the landscape,” Wanberg said. “We’ll adjust faster than you think to the cranes; remember the reason there are more cranes now is that we are building up in order to accommodate an urban lifestyle. We used to build out. In fact, there was a lot more construction back in the ’70s than there is now.”
On that note, Wanberg told me to go talk to Cary Bruteig, principal at Apartment Appraisers & Consultants, who has been studying and appraising Colorado apartments for decades. Bruteig told me the largest number of multifamily permits for metro Denver was pulled in 1973 and was around 25,000.
“The interesting thing about demographics in Denver is that the population percentages between millennials and baby boomers is relatively similar,” he said.
Bruteig knows what he is talking about. Author and consultant, John Burns, in his latest book “Big Shifts Ahead – Demographic Clarity for Businesses” discusses the trends behind this phenomenon. In the graph, Burns showed how the population for metro Denver was relatively constant for those born between 1960 and 2010.
I went back to Wanberg and explained what I’d learned. With Denver absorbing 6,000 to 8,000 units a year for the past couple years and Bruteig’s latest fourth-quarter construction report showing 25,382 units under construction and another 26,884 units planned, I said investors still have concerns about a big bust.
“Things are a little different now,” said Wanberg. “We have moved from a tertiary market to a primary market. We’re not the 12-hour city that we use to be. Go talk to Tom Clark.”
Clark, executive vice president at the Metro Denver Economic Chamber of Commerce, was doing one of the things he does best in Denver in January – talking about the Denver economy and making predictions. In a pie graph shared during multiple presentations, Clark emphasized the diverse nature of Denver’s present-day economy.
It made me wonder if the press and some investors are biased by Denver’s history? Are the boom-and-bust ways of Denver over; are things different now?
“You could argue the boom and busts may be less impactful now,” said Clark. “As Denver’s competitiveness and creativity has emerged over the last 10 years, we are charting a new path in the future. However, there is an almost nonexistent supply of new affordable condos, all housing, including rental housing, is now more expensive, traffic has worsened and the road to the mountains on I-70 is more crowded than ever.”
Clark was hopeful though. “Denver’s central location with the mountains, the sunshine and lifestyle options will always be appealing,” he said. “Plus, we have you millennials now to help solve all of these problems.”
I told him he was right, like a typical millennial, I am hopeful about solving those problems. However, it wouldn’t be without the help and guidance from his generation and others. We are all in this together. There are demographically divergent paths that lay ahead for Colorado, but Colorado is a pioneer state. We’ve always had great leaders step up and guide us into the unknown, up the hill into a challenge.
Our optimism reminds me of some of the stories Clark told me after one of his presentations, about the Colorado leadership who worked hard to build out the rail system, expand the convention center and make Denver International Airport a destination for millions.
During the recent Colorado Real Estate Journal multifamily construction panel, Scott Johnson, division president for Lennar Multifamily, said the lack of condo defect litigation reform has created an opportunity for entrepreneurs.
An unbalanced condo market, high housing prices and the challenges of Interstate 70 are all issues that affect Colorado’s appeal to millennials and baby boomers. All three issues require political pressure and ingenuity to overcome.
Colorado, thankfully, has a long history of leadership and political cooperation that has proved successful in the past. One of the smartest investments we can make right now is to take action and use the creativity and energy of our massive millennial resource, while also tapping the vast experience of our active baby boomer pioneers to move our great state forward. This is Colorado, after all; we’ve got big mountains and we have always enjoyed taking the harder path.