Identifying Development Opportunities Before They Turn Into Problems by Travis Hodge
By Desiree Rogers Posted November 22, 2022
Identifying Development Opportunities Before They Turn Into Problems
Hypothetical Jeopardy! scenario: “Working in CRE” is the category, and “Advise, sell, facilitate, and sometimes provide occupational therapy for clients” is the clue. If you responded, “What do brokers do?” then you’re correct. Of all the duties brokers are tasked with, the most common one happens to be the most impossible: predicting the future.
It’s fun trying to predict the next RiNo. It’s part of every broker’s job. But when it’s time for investment committee, your broker is nowhere to be found. You can’t just say, “Well, my land broker really, really likes the West Colfax corridor. He said if it were his money, he’d build here.” Turns out, your broker has no money, and your conclusions must be supported with data, trends, graphs, etc… With so much information to choose from, how do you cut through all the noise?
Developers and brokers alike are constantly searching for upside: which submarkets have the most potential, where do people want to live, who’s adding jobs, etc… All for the sake of identifying potential upside. The problem with data is that it’s easy to manipulate. You can spend all day cherry-picking data points to support your case. But is it really upside, or just a bunch of numbers?
Instead of a particular location’s upside, maybe we should spend more time identifying which areas have the biggest problems? Not only are problems easy to identify, but problems create opportunities. Isn’t it opportunity that we’re all chasing?
Take City of Denver as an example. We knew for a very long time that Denver struggled with affordable housing. Something had to be done. We knew City Council was studying different ways to solve the problem, and we knew they’d eventually do something. But by the time we saw the draft affordable housing ordinance, it was too late. That didn’t stop developers from flooding the planning department with concepts, far more than they’re equipped to handle. Sadly, many of these concepts won’t survive. Why weren’t they submitted a year or two earlier? It’s not like we were blindsided by the issue. Seems like a missed opportunity.
Arvada serves as a more recent example. Tap fees were already high at $25,000, and Arvada’s issues with infrastructure and water were no secret. Remember the “Gross Reservoir Controversy” headlines? Previous ballot measures tried to address the issues by increasing taxes. The problem was staring right at us. So was the opportunity. Eventually somebody had to pay for it, and developers almost always lose in a game of credit card raffle. Here we are today, with the news that Arvada’s water tap fees next year will grow to a staggering $54,000 – that’s a 116% increase for those of you keeping track. Projects that could have survived on the margins are no longer feasible. Developing in a supply constrained submarket west of I-25? Sounds like a great opportunity.
Great, but there’s nothing developers can do about those problems now. Where’s the next opportunity? Hint: type “Littleton affordable housing” in your search browser… you’ll only get about 800,000 results.
Or try Broomfield City Council, where housing has been a major topic for over a year. A recent report estimated a 2,500 to 3,000 shortage of affordable and attainable housing units and goes on to suggest solving the problem with $19 million in contributions from for-profit stakeholders (developers, cough cough) and another $28 million raised from 1% of every household’s annual income. Said the Broomfield resident, “I’m ok with the first part, but…”
There are plenty of issues on the horizon for communities across the entire Front Range. Most of the issues fall into three major buckets: affordable housing, water, and infrastructure. Some problems require more immediate attention than others, but the clues for every problem are out there: City Council meetings, housing studies, citizen initiatives, ballot measures, etc… Remember, the internet is your friend.
Article XX of the Colorado Constitution paved the way for home rule governance which gives citizens more control over local matters. The people get to speak with their votes, what a novel concept. A major downside, however, is that the people usually end up kicking the can. It’s incredibly difficult to convince people to tax themselves, but someone must pay. Growth is an easy target, and the “greedy developer” usually takes the blame. While developers technically end up footing the bill, the burden almost always falls on the residents. When a city increases tap fees, development slows, housing supply decreases, existing home values increase, and property taxes go up.
This November, Monument’s first drafted home rule charter will be placed in front of voters. Monument isn’t a huge town, but it’s an attractive place for multifamily development. If the charter is adopted, the citizens take control of their future. A future that is guaranteed to not only see growth, but also face the decision of how to pay for that growth. To all the greedy developers out there: I think someone’s knocking at the door. Could it be… opportunity?