The Source, an artisanal food market housed in a 140-year-old industrial building that anchors the river north neighborhood (RiNo), downtown Denver’s latest development frontier, is a good spot for observing the city’s zeitgeist. The building includes one of Denver’s best restaurants, Acorn, and around the perimeter small retail shops sell fresh bread, flowers, jewelry, wine, espresso and locally raised meats. A brewery and a Mexican restaurant round out the mix. The central atrium is filled with the clicking of laptops and Lululemon-wearing moms chatting over almond-milk lattes. With a modern industrial feel balanced by exposed brick and graffiti remnants, the Source is almost always packed with millennials. The place is hot. Although hot might be an understatement. “The word that’s used most frequently in describing the last two years of Denver’s real estate market is unprecedented,” says Anthony Rael, chairman of the market trends committee for the Denver Metro Association of Realtors.
Quality of Life
Rael’s stats show that the median price for detached single-family homes increased 30 percent from March 2012 to March 2016. The condo market is even stronger, posting 37 percent growth during the same period. “We have seen boom-and-bust cycles here,” he says. “But the last 18 to 24 months? We’ve never seen anything like it.”
Tom Clark, CEO of the Metro Denver Economic Development Corp., expects 2016 to be the best year ever for the city’s economy overall. “We’ve got the lowest unemployment on record, the highest wages and our economy has never been more diverse,” he says.
Denver’s growth is a function of that diversity. The key sectors driving the economy: aerospace, finance, telecom, software, clean energy and brewing (craft beer is big here). Most of these businesses are in the so-called innovation space—in other words, new technologies building new companies which ultimately pay higher wages to educated workers.
The growth is also thanks to the fact that Denver was better prepared than many cities to rebound from the 2008 recession. The city already had launched its multibillion-dollar transit initiative—focused on expanding the light-rail network—when the market collapsed, and it proved to be a forward-looking move that made the city appeal to upwardly mobile young people. Millennials are attracted to funky, urban spaces, and Denver’s developers are creating the kind of housing that appeals to the demographic.
One such developer is Mickey Zeppelin, a Denver native who has been transforming fringe urban neighborhoods for 45 years. Zeppelin Development built the Source along with several other residential and commercial properties in the RiNo neighborhood. “We’re kind of the black sheep of the industry,” says Kyle Zeppelin, copresident of Zeppelin Development and Mickey’s son, referring to the duo’s interest in sites that others have given up on. “We find unique opportunities.”
Their initial RiNo project, Taxi, transformed an old depot that housed yellow cabs into a collaborative work environment catering to creative types. Now the team is partnering on a hotel next to the Source and another food hall concept, Zeppelin Station, at the new RiNo light-rail stop. “We’ve done a lot of this without neighborhood infrastructure,” says Kyle Zeppelin, although he notes that the city is now investing $25 million to improve the main RiNo thoroughfares. “We’re excited to see that investment from the city.”
Such public-private collaboration is common in Denver. Josh and Jen Wolkon, owners of Secret Sauce Food & Beverage, a restaurant group, have opened four Denver eateries in the last 19 years, but they say the current pace of growth is unlike anything they’ve seen.
The couple launched their first restaurant, Vesta Dipping Grill, in lower downtown (LoDo) in 1997, just two years after the baseball stadium Coors Field opened, marking the beginning of downtown Denver’s evolution. He recalls discussing “the rise of the creative class” with then mayor (and now governor) John Hickenlooper back then. City leaders knew Denver had the location and potential to draw diverse talent.
“People in Denver at that time knew that we had this great foundation, and we needed independent restaurants and retail to take us out of the ‘cow-town’ days,” says Wolkon. “There was an awareness that people were craving something new.” Entrepreneurship, born in part out of the city’s pioneer history, combined with investment in projects like the light rail and Coors Field to reinvent the city. “Denver is a super desirable place to live,” says Wolkon. “There’s a great energy and a real sense of work-life balance.”
The light-rail project, which will connect downtown Denver to its suburbs and redeveloping urban neighborhoods, couldn’t come at a better time. A severe inventory shortage is driving starter home prices out of reach for most young people, and inventory is further constrained by a complex statewide housing law that has practically halted new condominium development. The law, which allows homeowner associations to file class-action lawsuits, has made insurers blanch at backing any condo development for fear of crippling legal challenges.
Thirty miles north in Boulder, Colo., the market is also seeing record appreciation and a dearth of inventory. But unlike Denver, which still has older metro neighborhoods to mine such as RiNo, Boulder is essentially built out—prices and desirability are quite high. “These days the piece of land for a house runs about $600,000,” says David Scott, president of the Boulder Area Realtor Association. “You’ll sometimes pay more for land without the house because it’s going to cost money to tear down the existing home.”
Ever since Colorado legalized recreational marijuana in 2012, commercial real estate has also been tight. The initial “green rush” sent marijuana businesses searching for cheap warehouse space in which to grow their crops, and because most lenders didn’t allow marijuana tenants in mortgaged buildings, those who owned warehouse space outright found themselves in high demand. In Denver there is now at least 3.7 million square feet of industrial space devoted to growing cannabis, according to commercial real estate firm CBRE. The state collected $135 million in tax revenue from $996 million in total marijuana sales in 2015, and the cannabis industry is on track to bring in more than $1 billion in total revenue in 2016.
Yet even in tight real estate markets like Denver and Boulder, there are investment opportunities. Developers are building apartments that look very much like condos because after seven years these new apartments can legally be transitioned to condos. One need only look at the Regional Transportation District map to see where the burgeoning markets will be. “Everyone wants to be within walking distance of the light rail,” says realtor Rael. “Just take a look at that map and buy property a mile or two on either side. It’s a no-brainer.”
This article originally appeared in the 2016 June/July issue of Worth.