Writing > Newsweek

Denver entered the eighties as a boomtown with a skyline filled with construction cranes and suburbs expanding rapidly eastward across the prairies and westward into the foothills. The city was bursting with money from the energy industry as corporations moved offices and headquarters into the city. While much of the rest of the country had suffered through a recession, Denver's "recession proof" economy expanded and real estate prices climbed steadily.

When oil went bust, so did Denver's bubble. The city was caught badly overbuilt in both commercial and residential properties. Layoffs, first in energy related businesses and construction, left many families without income in new homes. Many had used "creative financing" schemes that bought down the mortgage rates for the first few years, then graduated to higher rates along with their expectations of higher income.

By 1988, over 20,000 homes had been foreclosed and thousands more were walking away from homes that had plummeted 20% or more in value. HUD only made matters worse by dumping some of its 7,000 properties and in some areas values dropped by as much as 75%. Huge, new skyscrapers sat empty in downtown Denver, trying to compete in a declining market already suffering from a 26% vacancy rate.

Even as Texas cities in the oil patch recovered, Denver has continued through years of dropping or stagnant prices and the glut of HUD homes. Daily television ads tout the ease of purchasing a HUD home with a jingle that has become a familiar tune to every Denverite. Each Sunday the Denver Post includes a HUD magazine style supplement listing hundreds of homes still available. Townhomes and condominiums can be had for as little as $100 down and single family homes for $500 down. On Wednesdays, both the city's daily newspapers feature "Offer Period Homes" in the classified sections. These are newly acquired homes for which HUD will take offers in the ensuing five days of not less than a 91% net return. HUD has even promoted special deals like cash back for fix-up and payment of homeowners association fees for a year on condos and townhomes.

In spite of HUD's role, Denver has recently experienced a slow but steady upturn in real estate. Homes and commercial properties started quietly disappearing from the market early in the spring and inventories have suddenly begun to shrink. Closings on residential properties are up 8% over last year as are typical prices. Re/Max of Colorado posted record sales volume for the first six months of 1990.

According to Re/Max vice-president, Daryl Jesperson, "homes in the $130 to $180 to $200 thousand range, in reasonable shape will sell quickly. That's the hot segment." Properly priced homes are turning around in 85 to 110 days. He attributes the activity largely to Denver's positive attitude. Jesperson cites an underlying concern though that "RTC is going to dump a lot of properties at once, but they're so tangled in bureaucracy that they probably can't manage it."

Through tough economic times the city has been on a binge of public works with voters passing enormous bond issues for projects including a new convention center, construction of a new airport, construction of a major league baseball stadium, a new library, improvements in the Denver Center for Performing Arts and the city's schools. The NCAA's Final Four and the first Denver Grand Prix also brought the city major TV coverage. With its noticeably cleaner air (the U.S. Conference of Mayors gave first place to Denver in the City Livability Awards due to the 98% improvement in Denver's air quality) and world-wide publicity on prime office space at $13 per square foot, Denver is now attracting a diverse new set of technocrats.

President and CEO of the Greater Denver Chamber of Commerce, Dick Fleming agrees that the community's attitude has a lot to do with the recovery taking place. And he points to the newly opened Nieman Marcus, Saks Fifth Avenue and Lord & Taylor stores as a strong affirmation of their confidence in the city. While much of the growth is due to expansion of businesses already located in the area, a large part is also due to consolidation and relocation by large corporations like AT&T and Merrill, Lynch. "The soft market has been somewhat of an asset in attracting new businesses, especially when combined with the high quality of life, the low cost of living and the fact that we have the highest level of education per capita.", Fleming says.

One builder experiencing growing demand for new homes has found that the biggest problem now is in production and getting qualified construction workers. "They all left town", says Village Homes spokesman, Donn Eley. The company expects to build about 1,000 more single family homes this year than last in spite of price increases of more than 5%. "The margins are tight, but we like what's happening", he says. Eley believes that in spite of economic conditions "the market will seek out good projects and snap them up." The company has chosen carefully on where to build and has done well in areas with "no Silverado problems hanging over them."

Commercial real estate is rebounding too. The first six months of 1990 show an absorption of 1.7 million square feet of office space as opposed to 700 thousand for all of 1989; a rate up by almost 400%. President and CEO of Fuller & Co., Don Kortz says that "out of state interests on both coasts saw that prices were so incredibly low that they started to come here. I have smiles on a lot of my brokers' faces now!" According to Kortz, the typical organization moving to Denver is a user of space. "They're going to make a good deal."

When asked about the strength of Denver's economy in the face of a national recession, Kortz responded that "Denver has put into play those things that are needed to ignite an economy. Unless it's a terrific recession, Denver's economy is strong enough." He went on that "the biggest concern is the lack of financing...the S&L debacle."

Coast to Coast, a recreation club company for RV owners moved from Washington, DC to Denver after company president, Pat Butler sized up the Denver real estate market during a business trip. "I'd been told that it was depressed and that there was a lot of flexibility", he says. Coast to Coast was able to buy and remodel a 60,000 square foot building on 5.3 acres for the same monthly cost as his rental in Washington. "It's in as nice an office park as there is anywhere in the country", he says, "and it overlooks a golf course and the mountains."

Butler says that Denver's time zone was also a contributing factor. He was able to cut office hours from 13 to 12 hours per day and still provide the same quality of telephone coverage to both coasts. Denver's highly literate work force was also appealing.

In addition to the 100 new hires and 22 acquired employees, Butler moved 18 families to Colorado and says that "the reception that we've had here is great. I really believe that Colorado is the place to run a service company in the 90's!"