BrokerageReports

Denver a Rising Star City, says JLL

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According to JLL, the pandemic has accelerated migration trends to a handful of rising star cities and as a result, investors are following suit. Growth markets, including Denver, have witnessed 10-year population growth between 10-30 percent, outpacing the 2010-2020 U.S. population growth of 7.1 percent. While Gateway cities will always will be attractive from both a resident and investor standpoint, growth markets provide a lower cost of living, a lower average commute time and amenities that are now rivaling gateway markets.

As a result of this growth and macro trends, the job recovery has been nearly twice as fast in these markets and the country is seeing industry clusters develop in the tech, life sciences, media, professional services and finance/insurance sectors.

“Denver has witnessed a 17 percent population growth in the last 10 years to more than 2.9 million residents, as people are attracted to the affordable nature of the city paired with the active outdoor lifestyle,” said Jordan Robbins, senior managing director, JLL Capital Markets. “The city is ranked in the top five U.S. markets for job recovery and continues to benefit from West Coast spillover and gains in aerospace, engineering and contracting.”

How does this all translate for an investor?

Growth markets report significantly greater rent and occupancy growth, boasting an average five-year rent growth of 37.6% across the eight cities, versus a 17.8% U.S. five-year rent growth. In terms of net absorption, the growth markets have seen on average 6% net absorption over the last five years in comparison to the U.S. five-year net absorption rate of 2.1%.

Domestic institutional investment is on the rise in the growth cities. Foreign investors have increased investment volume in Atlanta, Austin, Dallas, Charlotte, Miami and Raleigh 100-200% in the last four years. Top-end pricing is now routinely surpassing $500 per square foot in these geographies and approaching $900 per square foot in Austin, which has benefitted from numerous corporate relocations in the past year.

“Denver is regularly identified as one of the nation’s top markets for new corporate headquarter relocations and expansions due to the growing educated labor force, high quality of life and economic strength,” added Peter Merrion, senior director, JLL Capital Markets. “Currently, Denver is home to 22 Fortune 1,000 companies and 10 Fortune 500 companies. In addition, occupancy growth in Denver is about 6% above primary markets, with LoDo and the Tech Center attracting the build of inbound
migration and expansion from companies such as VF, Robinhood and Healthpeak.”

As we look ahead, JLL anticipates the line between gateway and growth markets to blur. Gateway markets such as New York City and San Francisco will always attract and retain both residents and companies however the “new gateway” cities will be more in favor from both classes on a go-forward basis.

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