Growing Pains: Managing ‘responsible growth’ in Denver

Construction may have hit its peak, but experts say building will continue

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Looking out over the horizon in Denver, cranes have become a common sight. They pop up as quickly as the buildings do, working to permanently alter the city skyline.

Just how many cranes go up is big news, with both local and national news outlets like The New York Times producing stories on city rankings. Last year, Denver ranked fifth in the United States for having the most cranes, according to data from Rider Levett Bucknall, an international construction firm. The company counted 28 tower cranes throughout the city, compared to 29 the year before. Rider Levett releases a crane index analysis annually.

The very slight decrease is something construction and development companies are seeing almost across the board. But city officials and experts say that while construction might be slowing down, it is certainly not coming to a halt.

“Just because something’s declining, doesn’t mean it’s negative,” said Bill Mosher, the senior managing director of the Colorado office of Trammell Crow Company.

Construction has both the biggest visual and physical impacts on development in a city. People can see the construction happening. It may impact traffic while they drive, or block sidewalks and parking in their neighborhood.

But, it also is a driver in the economy. It creates jobs and brings billions of dollars into the city. Construction also comes with a set of problems of its own, with delays and labor shortages being some of issues that can creep up as building is underway.

Construction boom

Construction really started happening in earnest in Denver in 2014 and 2015. For the last several years, those numbers have continued to go up. “The last six years in particular have been increases year over year,” said Mosher.

He added that although early numbers are suggesting that 2019 construction is going down slightly, he still expects that there will be more projects this year than in the early years of the boom.

The construction process starts with a company submitting site plans to the city. Project coordinators will then work with the company to see if the project is viable and what the construction impacts will be, said Scott Prisco, the chief building official with Community Planning and Development in Denver.

Once a project has been approved, the construction companies apply for the various building permits from the city. Those permits can give an idea of not only what is being built, but how construction will continue into the future, Prisco said. Since development plans have been coming in at an upward trend for the last two months, he expects large construction projects to continue into the foreseeable future.

Right now, single-family projects are remaining steady, and may be trending slightly down. Multi-family projects on the other hand are on the rise compared to the last two years, Prisco said. As far as office projects go, the city is seeing more permits for tenant finish projects inside of buildings.

“Some of the large buildings that were built on spec, they’re being filled now,” he said, adding that those new tenants are building out office spaces for their needs.

The permits also require contractors to put an estimated cost of the project on the form. While Prisco said it won’t give exact numbers of an individual construction contract, it can give the city an idea of how much is being spent on a project. The cost valuations follow the International Code Council, Prisco said. The ICC is a member-focused association that is develops the codes and standards for construction around the world, according to its website.

From 2015 to 2016, those cost valuations went from $2.4 billion to $3.7 billion in Denver, and have continued to go up ever since, Prisco said. He estimated that the city is on track to do around $5 billion this year.

“We’re seeing some incredible unprecedented growth right now,” he said. “There are not that many cities across the united states doing that volume of construction.”

Labor shortages

As with other numbers starting to show a slight decline, so is the number of jobs, Mosher said. He estimated that there are around 100,000 construction workers in the Denver metro area where most of the work is concentrated. He thinks this year there will be a drop of about 3,000 jobs in the market.

Many contractors in the city are busy with projects. Delays can become inevitable as schedules start to stack up. Mosher said that it’s not necessarily the busy-ness causing delays, but a shortage of specialized construction workers. This is something happening on the national level, he said, not just in Denver.

Because there’s a shortage, the workers that are available have higher wages. But when it takes time for a contractor to find and hire that worker, it can cause the delay. And in this industry, “time is money,” Mosher said.

Companies like Colorado Resource Partners, which runs the WorkNow program in Denver, are hoping to close that gap. WorkNow helps to connect people with different employment barriers to construction jobs.

John Colin Ewer was on unemployment when he first heard about the WorkNow program. He had worked various jobs in the past, but nothing he would have called a career. Getting a job in construction was not something he has considered before, but he was intrigued by the program, Ewer said.

WorkNow helps to give people a leg up, and “get some help when you’re first starting off in your career,” he added. The program helps with school tuition and money for tools, as well as work boots for job sites.

Ewer is now working as an electrician apprentice. He said he’s been appreciative of the program, and finding a possible career.

“It’s definitely a relief,” he said.

Starting to slow

Another trend that can be seen in the industry is developers selling properties from one company to another. Mosher said this sometimes happens when one company’s plans for a new building fall through. The company will sell to another one that can possibly come up with a better plan for the building.

But even that trend is starting to slow. It’s a case of Denver possibly becoming its own worst enemy. As the city has become more popular to build in, the prices have started to follow.

“The business is a little hard right now because rent prices are slowing and land prices are high,” Mosher said.

In the realm of office space however, business is booming. “People want to buy ‘em,” Mosher said of office buildings.

The commercial market often follows the housing market. The market is primarily driven by residents. With more residents coming in, more housing needs to be built, and more office spaces need to be built to house the jobs created by those people coming here. They’re all inter-related, Mosher added.

Like the housing market, there’s a buyers’ and sellers’ market for commercial office spaces. Mosher believes that 2018 will prove to be the peak of activity in Denver, and that we’ll start to see construction and prices go down.

Building with conscience

As residents have started to voice concern about growth, and others have altogether left the city due to rising costs, Denver officials have put some policies in place to help control development.

Affordable housing has become a top priority for the city. Some of the fees from construction go toward an affordable housing fund.

“It’s really the focus of our planning,” Prisco said, “and a lot of conversations between different agencies that we’re having right now is ‘How do we get as much affordable housing built as possible?’”

Policies like this, as well as a green building ordinance passed earlier this year, help city officials manage “responsible growth in Denver,” Prisco said.

The city has also been working to gather resident input on the Neighborhood Planning Initiative. The city began working with the northeast neighborhoods, creating an overall plan on how development should be handled. Plans are grouped by region and include several neighborhoods.

During a Congress Park Neighbors meeting on Aug. 21, city staff told residents that they upped their budget to make sure they were reaching out to the community as a whole — renters, people of color, homeowners, the refugee communities, low-income workers and more.

Although residents of Congress Park voiced concern on how density could impact their neighborhoods character, staff said that the new Blueprint Denver plan is striving to build density in every neighborhood in the city to help equalize some of the impacts.

Managing affordable housing is one of the most important aspects of equalizing Denver neighborhoods. Zocalo Community Development, the company behind the 1st Avenue Hotel project on South Broadway, has a goal to make its projects either 100% affordable or close to it, said Mark Atkinson, the chief development officer.“We see affordability as being the next crisis of housing in Denver,” he said.

It also works to renovate historic properties as part of a project. The 1st Avenue Hotel, 49 W. First Ave., will feature 102 affordable units in a restored historic structure.

Although historic properties are often more complex, Atkinson said that Zocalo is not the type of development company that scrapes and builds in a “rinse and repeat” fashion. The company is also its own contractor and building manager, which means it stays in the neighborhood more long-term than other developers.

“We’re now a part of the neighborhood, we’re not just building and flipping projects,” Atkinson said.

This practice can be a benefit for neighbors concerned about losing the character of their neighborhoods. Denver residents are particularly concerned about historic preservation in the city. With so much growth happening, historic homes and buildings are being torn down in favor multi-family projects or other development projects.

Many developers, such as Zocalo, will work with registered neighborhood organizations and merchant associations to learn what those groups want out of new developments.

Prior to his job at Zocalo, Atkinson worked in mountain resort communities building projects with Shaw Construction. Small mountain towns are also feeling the pinch of development and a greater need for affordable housing, he said.

“Working in resort communities I developed a real sensitivity to small communities,” he said. “We’re there for the long haul, and we want to be good neighbors.”

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