Growth As Technology Center
The Denver Metropolitan Statistical Area has a healthy mix of businesses supporting its economy, relieving it from dependence on any one sector. Chart 1 highlights the blend of private sector employment. While certain areas such as natural resources have seen a significant increase in employment on a percentage basis, we note that overall, the sector is still small as a fraction of overall private sector employment. Table 1 shows oil and gas-related employment for both the Denver and Houston MSAs, and suggests that the Denver economy is significantly less exposed to the sector than Houston, for example.
April 2015 Private Sector Job Composition, Denver-Aurora-Lakewood, CO MSA
Q4 2014 Average Oil-Related Private Sector Job Employment, Composition, Denver-Aurora-Lakewood, CO MSA
Denver is emerging as a technology start-up destination; a 2015 Kauffman Foundation study1 named Denver #5 out of 10 metro areas with the highest tech startup density—coming in ahead of San Francisco. Angel investors and private equity firms may not have as robust a presence as in Silicon Valley or Manhattan, for example, but that is beginning to change. Denver will be one of 20 cities that will be on Facebook’s 2015 “FbStart World Tour”2 and as of June 2015, Denver start-ups have access to a free co-working center via the Commons on Champa—a 20,000 sf space that will be used as a hub for expanding entrepreneurship in the city. In addition, new companies will benefit from a 4-year, $4 million gift from the Blackstone Charitable Foundation. The grant forms the basis of the “Blackstone Entrepreneurs Network,” an organization with a mission “to connect Colorado’s great serial entrepreneurs and scale-up experts with one another to collaborate to identify, promote, assist, and connect Colorado’s ‘Gazelles’ and ‘Unicorns’ – the State’s best high-growth, high-prospect private firms in the technology, health, aerospace, energy, and natural foods and products industries.” Denver has also given rise to numerous start-ups that have developed out of the University of Colorado system. Over the last 20 years, 141 new technology businesses have been founded out of the university,3 with 89 companies in the biotech space alone. 80% of the start-ups are still operating, and importantly, almost 70% of the companies have remained in Colorado.
In addition to start-ups that have emerged from academia, other technology companies have been spawned by more traditional incubators.
Meet-up groups such as the Denver Open Coffee Club and Denver Founders provide networking opportunities for start-ups, while Denver Startup Week, scheduled for September 28 - October 2 2015, will host a week of events “to make Denver an entrepreneurial center supported by a strong community of entrepreneurs, investors, government and education.” The Denver Metro Small Business Development Center also supports start-ups, with efforts such as their “Trout Tank” event— where entrepreneurs pitch their businesses to a “school” of 30 lenders and investors. Other opportunities for collaboration among new businesses likely occur at co-working spaces such as Uncubed and Thrive Workplace (which has two locations in Denver) as well as at Galvanize, which offers data science courses in addition to co-working space in Denver’s Golden Triangle and beyond.
Attractive for Workers
Many who live in Denver are fond of reminding visitors that their city gets as much sun as Miami4—just one of the many ways in which Denver’s quality-of-life excels—and one reason that net migration has been so strong, particularly among millennials. Denver ranked third among the top ten best cities for young college graduates according to Forbes,5 and despite healthy growth in the population, still offers plentiful employment opportunities: Chart 2 shows that Denver’s unemployment rate is well below the national rate of unemployment despite showing one of the country’s highest rates of population growth (Table 2).
Unemployment Rate in %, United States and Denver Metropolitan Statistical Area
Population By City By Year
Denver’s transportation infrastructure is improving too, which should add to the area’s desirability for workers. The region’s FasTracks Program—a comprehensive transit expansion in excess of $5 billion that will ultimately result in 122 miles of new commuter rail and light rail, 18 miles of bus rapid transit, 57 new transit stations and 21,000 new parking spaces at light rail and bus stations—is already expanding commuting options for those workers who choose to live outside the city’s boundary.
FasTracks Progress Map, 2015
Attractive for Employers
Denver offers employers access to an appealing workforce. Millenials, in particular, have been responsible for a large portion of Denver’s growth. As shown in Table 3, Denver has had one of the highest changes in the fraction of the young population, which bodes well for employers looking for tech-savvy workers. Moreover, the workforce is well-educated; a larger proportion of Denver’s working-age population has college degrees than in Seattle or Portland, Oregon for example (Chart 4). Colorado itself has one of the highest per capita concentrations of science, research and engineering facilities in the nation, with 24 federallyfunded research labs, including the National Renewable Energy Laboratory (NREL) in Golden and the U.S. Geological Survey (USGS) in Lakewood.
Fraction of Denver Population by Age, 2008 and 2013
Percentage of the Population Aged 25+ With a Bachelor’s Degree or Higher, by Metro Area
Office space in Denver is among some of the least expensive in the country, as shown in Chart 5, making the area financially attractive for employers looking to expand or relocate their business. Moreover, new construction should prove appealing to area firms. A new 40-story office tower is underway near Larimer Square and the 16th Street Mall. With 10-foot ceilings and glass walls, tech-savvy tenants should find the 656,000 sf of office space attractive, particularly given a lack of newer-space options for larger users. In a somewhat atypical move, the developer has broken ground without an anchor tenant in place, suggesting confidence in the outlook for the local market over the next few years—whether from the emergence of new companies or the expansion of existing firms.
Overall Asking Rents, Q2 2015
Other new office projects include a 210,000 sf office space expansion at Colorado Center, as well as several projects underway in LoDo, including the Z Block building anchored by Prologis, as well as the Triangle Building anchored by Liberty Global.
Companies like DataLogix, Gyro and OpenTable have all expanded their presence with larger leases; even local company EBags recently opted to move its customer service back to Denver after five years of using a staffing firm out of state. Tech companies are finding Denver attractive, too: Optiv, the $1.5B merger of Accuvant and FishNet Security, announced that Denver will be the location for their new headquarters, while Fathom Entertainment, a joint venture of theaters AMC Entertainment, Cinemark Holdings and Regal Entertainment Group has already expanded its presence by upsizing its leased space twice since the start of the year to nearly 17,000 sf. Other newcomers to the area are shown below.
We see the region’s favorable workforce demographics and attractive commercial real estate options as just two reasons that an increasing number of start-ups will choose to base their company out of Denver in the months ahead.