Quarterly Economic Update  
First Quarter 2010
 
Positive first quarter reports on consumer spending, home sales, and new home construction are among several signs of economic recovery. While the recovery appears to be broad-based, many analysts question whether the economy can maintain its momentum without help. The popular first-time homebuyers’ tax credits and many other government support programs have expired, and improvements in the labor market must continue for some time to noticeably reduce unemployment.

Local labor markets are beginning to stabilize, but metro Aurora/Denver and Colorado jobs losses through the recession were somewhat more severe than losses in other areas. Ideally, Aurora/Denver area employers’ increasing willingness to hire will – over time – generate the job growth necessary to trim unemployment and advance early improvements in household spending and housing. Local measures of consumer confidence have improved, and the rate of over-the-year decline in Aurora retail sales tax revenue has slowed considerably. The pace of Aurora home sales is still sluggish, but home prices have risen solidly. Now that the homebuyers’ tax credits have expired, the immediate future of housing depends heavily on foreclosure trends and the labor market.

In this recovery – and in many others before it – risks remain as conditions gradually improve. Even in this fragile environment, though, business activity in Aurora is strengthening. 

Employment Activity
  • Labor markets in metro Aurora/Denver and Colorado were less improved in the first quarter than markets elsewhere. Data that are adjusted for seasonal trends show metro Aurora/Denver and Colorado employment declined slightly between the fourth quarter of 2009 and the first quarter of 2010, while nationwide employment was essentially unchanged.
    • While further layoffs are unwelcome, the pace of job loss in early 2010 had slowed significantly from prior quarters. First quarter employment across all industries in metro Aurora/Denver was 3.5 percent lower than the year-ago employment total, employment statewide was down 3.7 percent, and nationwide first quarter employment was 2.4 percent lower than the year-ago total. (Source: Colorado Department of Labor and Employment, Labor Market Information; U.S. Bureau of Labor Statistics.)
  • Unemployment rates in the U.S., Colorado, and metro Aurora/Denver rose between the first quarters of 2009 and 2010. The metro Aurora/Denver and Colorado rates – both 7.8 percent in the first quarter of 2009 – rose in the first quarter of 2010 to 8.2 percent and 8.3 percent, respectively. The first quarter 2010 unemployment rate for Arapahoe County rose to 8.1 percent from 7.7 percent one year prior, and the Adams County rate rose to 9.8 percent from 9.1 percent in the first quarter of 2009. The city of Aurora’s unemployment rate for the first quarter of 2010 (10 percent) was up from the 9.6 percent rate reported one year prior, and the nationwide unemployment rate in the first quarter (10.4 percent) was up nearly two percentage points from the year-ago rate (8.8 percent).
    • In the months ahead, flat – or even increasing – unemployment rates are likely as a gradually improving employment outlook draws more jobseekers back into the labor market. (Note: unemployment rates are not seasonally adjusted. Source: Colorado Department of Labor and Employment, Labor Market Information.)
  • Aurora/Denver area employers may be slightly more willing to hire in the second quarter, according to results of the most recent Manpower Employment Outlook Survey. Thirteen percent of survey respondents in the Denver-Aurora-Broomfield MSA reported plans to hire in the second quarter, compared to eight percent of employers in the first quarter survey. The vast majority of Denver area employers, however, are taking a wait-and-see approach to staffing. Survey results show nearly three-quarters of Aurora/Denver area employers and 73 percent of employers nationwide plan no staffing changes for the second quarter. Roughly 16 percent of employers nationwide plan to add jobs in the second quarter. (Source: Manpower Inc.)

Consumer Activity

  • While consumer confidence remains well below levels consistent with a healthy economy, consumer outlooks improved significantly in the first quarter. The Conference Board’s U.S. Consumer Confidence Index for the first quarter was more than 73 percent higher than the year-ago reading. The Mountain Region Index for the first quarter rose more than 48 percent above the first quarter 2009 index level. Better job prospects will be critical to stabilize the still-fragile consumer outlook. (Source: The Conference Board.)
  • Retail sales in the city of Aurora declined from the prior year in the third quarter of 2009. Data from the Colorado Department of Revenue show third quarter sales down 10.9 percent over-the-year and second quarter sales down 12.2 percent. (Note: data for the fourth quarter of 2009 are not yet available. Source: Colorado Department of Revenue.)
  • City of Aurora retail sales tax revenues for the first quarter of 2010 fell 1.3 percent below the year-ago revenue level. First quarter was the sixth consecutive quarter in which tax revenues declined over-the-year, but the rate of decline is slowing. (Source: city of Aurora, Office of Budget and Financial Planning.)
  • Rising hotel occupancy rates are one sign of a slowly healing economy. First quarter occupancy rates in the South and Southeast Aurora/Denver market – which includes the I-225 corridor – averaged 51.1 percent, up from 49.2 percent in the first quarter of 2009. In the Northeast Denver market – which includes Stapleton and Denver International Airport – occupancy rates rose to 67.2 percent in the first quarter from 60.4 percent one year prior.
    • While occupancy rates have rebounded, average room rates have yet to recover. The first quarter average room rate in the South and Southeast Aurora/Denver market ($96.27) was 1.8 percent lower than the year-ago average. In the Northeast Denver market, the first quarter average room rate of $89.31 was 5.9 percent lower than the first quarter 2009 average. (Source: Colorado Hotel & Lodging Association, Rocky Mountain Lodging Report.)
  • First quarter passenger traffic at Denver International Airport was 3.8 percent higher than traffic in the first quarter of 2009. Some of the gain reflected weak travel trends reported early last year, but the increase also suggests consumer and business confidence is improving. (Source: Denver International Airport, Traffic Statistics.)

Residential Real Estate

  • A decline in city of Aurora existing home sales between the fourth quarter of 2009 and the first quarter of 2010 was relatively consistent with seasonal trends. The first quarter 2010 home sales total, however, was almost 14 percent below the first quarter 2009 sales level. The decline reflected a larger (21.4 percent) year-over-year drop in single-family detached home sales that was partially offset by a 9.6 percent increase in condominium sales. Second quarter data could show that city of Aurora home sales rose in advance of the April 30 homebuyers’ tax credit expiration date.
    • While recent home sales trends for the city have been mixed, average home prices have consistently trended up. The first quarter average single-family detached home price ($172,990) was 14 percent higher than the year-ago average, and the first quarter average condominium price ($92,750) rose 9.6 percent over-the-year. Aurora average prices for single-family homes and condominiums have now risen over-the-year for three consecutive quarters in a trend that could reflect a shrinking inventory of distressed homes.
  • Existing home sales for all of metro Aurora/Denver rose 2.8 percent between the first quarters of 2009 and 2010. The average first quarter 2010 selling prices for single-family detached homes ($269,360) and condominiums ($160,180) rose 11.8 percent and 9.2 percent over the year, respectively. (Source: Metrolist.)
  • Builders pulled more than double the number of housing permits in Aurora in the first quarter of 2010 as they did in the first quarter of 2009. Residential construction in Aurora continues to be driven by single-family homes, as no permits for condominiums or townhomes have been pulled since the fourth quarter of 2008. Builders in Aurora pulled nine permits for apartment units in the first quarter of 2010, and the permits were the first of their kind issued since the fourth quarter of 2008.
  • The count of building permits issued throughout metro Aurora/Denver in the first quarter of 2010 was nearly twice the count issued one year prior. The first quarter count of permits for detached, single-family homes was more than double the count issued in the first quarter of 2009, and the count of permits for condominiums and townhomes rose 53.6 percent over-the-year. Similarly, the first quarter count of permits for metro Aurora/Denver apartments was 40.8 percent higher than the count issued one year earlier.
  • Despite large percentage gains, permit activity remains below historic norms. The total count of metro Aurora/Denver building permits issued in the first quarter was less than one-third of the total issued in the first quarter of 2004, which was the peak year for metro Aurora/Denver building activity prior to the recession. (Source: Home Builders Association of Metro Denver.)
  • Adams County was one of just two metro area counties to report a decline in foreclosure filings between the first quarters of 2009 and 2010. First quarter filings in the county fell 1.4 percent over-the-year, while filings in neighboring Arapahoe County rose 11.7 percent. Because most metro area counties reported an over-the-year increase in foreclosure filings during the first quarter, the total count of metro area foreclosures rose 3.6 percent from the total reported in the first quarter of 2009. The nationwide count of foreclosure filings also rose over-the-year in the first quarter. (Source: Colorado Division of Housing, county public trustees, and RealtyTrac.)
  • The first quarter average apartment vacancy rates in Adams County (6.8 percent) and Arapahoe County (7.2 percent) were both below year-ago levels. City of Aurora vacancy rates in the first quarter ranged from 5.6 percent in the city’s southeast neighborhoods to 10.7 percent in the northern section of the city. First quarter vacancy rates were down from the prior year in most portions of the city, although vacancy rates increased in the southern and southwest neighborhoods.
  • The relatively widespread decline in first quarter vacancy suggests landlords “bought” higher occupancy with lease deals and concessions, some analysts say. Others note, though, that limited apartment construction and a steady stream of new residents are stabilizing apartment demand. Mixed data on rental rates suggests both scenarios could be true. The Adams County average rental rate for the first quarter ($875) rose 1.3 percent above the year-ago average. By contrast, the first quarter average rate in Arapahoe County ($841) was 2.1 percent below the first quarter 2009 average. First quarter monthly rental rates in the city of Aurora ranged from $741 in the city’s northwestern neighborhoods to $896 in the northeast.
  • The metro Aurora/Denver average vacancy rate for the first quarter (6.5 percent) fell nearly two percentage points below the rate for the first quarter of 2009. The region’s first quarter average rental rate ($877) was down 0.5 percent from the year-ago average. (Source: Apartment Association of Metro Denver, Denver Metro Apartment Vacancy and Rent Survey.)

Commercial Real Estate

  • The city of Aurora’s direct office market vacancy rate in the first quarter (20 percent) was slightly lower than the 20.2 percent rate reported in the fourth quarter. The first quarter vacancy rate was noticeably higher, however, than the 15 to 17 percent vacancy rates reported before the recession. The first quarter direct vacancy rate in metro area’s office market was 13.7 percent, down from 13.9 percent in the prior quarter.
  • While Aurora’s office market vacancy rate is higher than the average for all of the metro area, Aurora lease rates have suffered less damage throughout the recession. The first quarter direct lease rate for office property in Aurora ($16.14 per square foot) was down 1.1 percent over-the-year, while the first quarter average rate for Metro Denver ($20.03 per square foot) declined 5.7 percent from the year-ago rate. (Source: CoStar Realty Information, Inc.)
  • The direct vacancy rate in Aurora’s industrial market rose to 9.5 percent in the first quarter from 9.1 percent in the fourth quarter of 2009. Compared to the 10.2 percent vacancy rate reported in the first quarter of 2009, however, the vacancy rate for the first three months of 2010 was down considerably. The metro area direct vacancy rate for industrial property was 6.7 percent in the first quarter, down from 6.9 percent in the first quarter of 2009.
  • Still, Aurora and the metro area are currently buyers’ markets for industrial real estate. The first quarter direct average lease rate for industrial property in Aurora ($4.18 per square foot) was down 3.7 percent from the year-ago rate. The first quarter lease rate for all of metro Aurora/Denver ($4.75 per square foot) was down seven percent from the first quarter 2009 rate. (Source: CoStar Realty Information, Inc.)
  • The direct vacancy rate in the city of Aurora’s retail market declined to 9.7 percent in the first quarter from 10 percent in the fourth quarter of 2009, but the first quarter rate was higher than the 9.2 percent rate reported one year earlier. The metro Aurora/Denver direct retail market vacancy rate in the first quarter (8.5 percent) was only slightly lower than the 8.6 percent rate reported in the first quarter of 2009.
  • New Aurora retail property completed over the past year – including retail space in the Gardens on Havana development – is one factor behind a counter-cyclical increase in the city’s retail lease rates. The first quarter direct average lease rate of $13.70 per square foot was 2.7 percent higher than the year-ago lease rate. By contrast, the first quarter direct average rate for all of metro Aurora/Denver ($16.23 per square foot) was down 3.6 percent over-the-year. (Source: CoStar Realty Information, Inc.)

Prepared by Development Research Partners for the Aurora Economic Development Council

©2006 Aurora Economic Development Council • 14001 E. Iliff Avenue, Suite 211, Aurora CO 80014
T 303.755.2223 • F 303.755.2224