Americans overall are moving less, but young, college-educated people are relocating in large numbers — about a million cross state lines each year. The cities where they end up have a shot at becoming tomorrow’s “economic powerhouses.” That’s good news for Denver, which is one of the top 5 markets where millennials are moving, according to RealtyTrac’s census data analysis.
The influx creates opportunities as well as challenges in commercial real estate.
“One of the main reasons millennials are attracted to Denver is our strong job growth,” says Gabe Hill, MAI, a managing director of BBG’s Denver office.
RealtyTrac came to the same conclusion after studying population patterns — millennials move where there are opportunities to find jobs.
More jobs and a growing workforce mean greater demand for real estate. Millennials are projected to drive continued growth in the multifamily market in Denver. A recent report on the likeliest cities to attract commercial real estate investment in 2015 pegged Denver retail at No. 5 in the nation and Denver’s office sector at No. 6. (Denver came in fourth overall.)
Denver’s lifestyle and culture are also alluring to young people, Hill says. Millennials in general prefer a walkable urban core, and Denver has several mixed-use, New Urbanist projects in the works that promote their desired lifestyle. Due in part to millennials’ disinclination to drive, 66 percent of them rank access to public transportation among their top three priorities when considering a move. Denver has made major investments in this area with the renewal of its downtown rail hub.
Legalized marijuana cannot be ignored as both a magnet for many millennials and a driver of commercial real estate. “It definitely is a factor,” Hill concedes.
In fact, the rollout of recreational pot in Colorado has led to a rush on industrial warehouse space since state law stipulates the plants must be grown indoors.
Though millennials are high on Denver today, there may be a letdown in a few years when they want to buy property. RealtyTrac recently put Denver on its list of least affordable places for millennials to buy homes. Condos cannot serve as a cheaper alternative because of the extreme shortage of available units. Condominium development has all but ceased in Denver since a state law went into effect in 2010 making it easier for condo owners to sue builders for defective construction. In 2012, condos made up a scant 2 percent of newly built homes compared to about 25 percent in 2006 and 2007.
As the “National Journal” points out, Denver “may not be able to retain the young professionals who have flocked here if it can’t provide more opportunities for them to become homeowners.”
In the meantime, though, millennials are moving to Denver and making their mark. A “Denver Business Journal” headline sums it up best: “Millennials’ desires are reshaping Denver development plans.”