Boulder, Colorado
Tight Inventory, Rising Rents and An Economy with Staying Power
By Carole Vansickle Ellis
Boulder, Colorado, has kept a tight rein on its own growth almost since its founding, starting with U.S. Congressional approval of the allocation of 1,800 acres of area around the young city in 1899.
The city is known for careful control of urban expansion, such as “Blue Line” amendments that limit city water service by altitude, an Urban Wildlife Management Plan that protects prairie dogs and a variety of other native plant and animal species, and height limits on buildings to protect residents’ views of the surrounding mountains. Not surprisingly, these programs have preserved much of the natural beauty of the area while creating a market where housing shortages are an accepted part of life. In fact, home prices in Boulder rose 60 percent between 2010 and 2015, and median home values in Boulder are currently hovering around $900,000. Realtor.com analysts note that although Boulder homes are currently listing around $890,000, they are selling at a median of $945,000.
“Boulder has had a tremendously successful rental market, [but]…rental income is not the only way Boulder investment properties can make money,” observed Mashvisor analyst Hamza Abdul-Samad. He cited a “great economy,” the University of Colorado, and quality of life as reasons that people continue to move to Boulder even if they can only afford to rent instead of buy. “52 percent of the city’s residents live in a Boulder rental property,” he said, predicting rental owners would continue to enjoy high demand and low vacancy rates.
That demand for residential real estate has also been fueled by a strong population growth, observed Jack Krupey, principal of multifamily syndicator JKAM Alternative Investments. “We certainly have interest in Boulder because of the strong population growth, which is almost always good for real estate values, and its proximity to Denver,” Krupey noted. “Having a prominent University like the University of Colorado is a plus as well.” Since 2010, the Boulder population has increased by more than 11 percent according to information released in 2020 by the U.S. Census Bureau.
A Strong Economy Based in Technology
Boulder’s unique combination of hosting a world-class research university, major government research facilities, a thriving entrepreneurial population, and a plethora of high-tech industries including aerospace engineering, bioscience, cleantech, and IT, makes its economy uniquely stable and recession resistant. In the wake of the emergence of the 2020 COVID-19 pandemic, Boulder took less than a year to officially enter “recovery mode” in the first quarter of 2021, while the entire state of Colorado was declared officially “in recovery” by the end of last year and is expected to reach pre-pandemic levels of employment and economic activity by the end of 2022. In a period of time when many state and local economies are struggling to provide eager employers with labor, Colorado noted its labor-force participation rate was more than two-thirds, “nearly back to the pre-recession high.”
Easy access to “natural outdoor spaces” makes Boulder particularly appealing to big companies looking for new locations for headquarters post-pandemic, wrote Wall Street Journal commercial real estate reporter Konrad Putzier in February of this year. “Being able to take a lunch-break hike in the mountains is already a big reason why cities like Boulder are attracting big companies,” he explained.
Marco Santarelli, founder and CEO of Norada Real Estate Investments, noted that relative affordability also plays a role when “big tech” moves to Boulder. “The Boulder real estate market is relatively cheap [when compared] to the insane real estate prices in San Francisco,” he said. “For a small elite relocating from Seattle and San Francisco, Boulder is affordable.” However, he noted, the presence of this buying population does drive up home prices and rental rates.
While many tech giants have had a presence in Boulder for years, 2021 saw an increase in the number of those companies’ employees based in the city. This was positive for local real estate values and developers. For example, Apple is currently expanding its workforce in Boulder and, as a result, multifamily development is getting an additional lift from the projected entrance of these new residents. Apple, specifically, has been directly tied to rising values in office REITs and multifamily properties because, as GlobeSt.com contributor Jack Rogers explained, “Apple campuses are expected to create higher occupancy and rental rates at existing properties and more demand for development projects under construction.”
“Boulder’s technology economy and the information technology economy have grown up together, dating back to the 1960s when IBM established a 500-acre facility in North Boulder,” boasted the Boulder Economic Council in a recently released report on the IT/Software presence in the city. Today, the concentration of IT employment in Boulder is 2.7 times the U.S. average and the city is home to two of the world’s 10 fastest supercomputers. Tech companies with significant presence in Boulder include Google, IBM, Oracle, Qualcomm, Nest, SendGrid, Twitter, and dozens of others. Investment funds like TechStars also keep the momentum going for tech startups in the area. The TechStars fund was founded in 2006 and accepts 10 companies each summer to receive support and mentorship through the program.
Natural Beauty & Outdoor Disasters
Of course, it is impossible to discuss Boulder housing in 2022 without addressing one of the biggest environmental stressors on the market: the Marshall Fire. The Marshall Fire was a wildfire that started on December 30, 2021, and burned through more than 1,000 structures, including many residential homes, before ending due to heavy snowfall. The Marshall Fire was the most destructive wildfire in state history in terms of structures lost to the fire although there were just two fatalities. Overall loss totaled more than $513 million according to the Boulder County Assessor. The local housing market, already stretched thin, reacted with even stronger demand for the remaining properties.
“We were already in a low inventory/high demand situation. We took 1,000 houses out of that scenario [and]…put 1,000 people back into it that need homes right now,” explained local agent Kelly Moye, who is also a spokesperson for the Colorado Association of Realtors. She added that although many local professionals expected a brief pause in market activity, the reality was much more “intense,” with properties “right in the middle of the burn areas” selling within two days and well over asking price. Moye added that homeowners are noting in listings if the properties have been mitigated for smoke and ash and detailing proximity to burned or destroyed structures. She also said that proximity to those structures does not seem to be detracting from buyer interest or purchase price.
Because the Boulder market was already hot and the area is so attractive to residents, real estate analysts predict that most homeowners who suffered losses during the wildfire will not elect to leave the area. However, the market may heat up so much during the rebuilding period that lower-income renters, in particular, may find it financially difficult to stay.
Texas A&M professor of urban planning and architecture, Shannon Van Zandt, summarized the problem in a recent article first published in the journal The Conversation. “Research suggests that affordable housing will almost always be replaced by more expensive housing targeted to a wealthier demographic [after natural disasters],” Van Zandt wrote. She noted that Boulder elected to relax rental rules in the wake of the Marshall Fire in order to help residents find temporary homes by making it easier to obtain a rental license. The order waived outdoor lighting and energy efficiency requirements for these rentals and, in some cases, individuals who normally would not have qualified for access to affordable housing were permitted to access it for up to a year in order to obtain temporary housing during the rebuilding process.
Investors new to Boulder should be aware, however, that many of these temporary programs will not shift into permanency without rentals meeting new, standardized criteria when the grace period ends. Furthermore, access to relaxed licensing processes may be limited to investors who already own licensed rental properties in the Boulder area.
Headwinds to Watch in 2022
Although Boulder’s economy seems to be resilient enough to overcome headwinds emerging nationally in 2022, analysts and local economists warn that this year will not be without challenges for the market. Investors should be aware that in Boulder, like much of the rest of the country, decreased traffic to “retail, recreation, and restaurant establishments” will play a factor in the performance of real estate related to these sectors. Industries like leisure and hospitality, mining, and logging also could face an uphill battle as job deficits in these sectors impede progress toward a full recovery.
The biggest issue for Boulder, like the rest of the nation, will likely be inflation. However, Colorado has actually posted lower inflation than the national average. Across the United States, national inflation rose 4.7 percent in December 2021. By comparison, Colorado inflation rose less than 4 percent. Historically, real estate has acted as a hedge against inflation, so this is unlikely to slow acquisitions in the immediate future. However, as interest rates rise in 2022, the buying population in Boulder may begin to decrease in size although this trend will likely be delayed as well since much of this purchasing population is coming from other areas of the country where housing is comparatively much more expensive. Investors may not benefit from waiting out the market; local experts say there is unlikely to be a substantial decline in home prices or competition for properties.
“I don’t think we are seeing a drop off a cliff at the end of 2022 where suddenly this housing market is collapsing,” said local real estate professional Brad Weinstein at the end of 2021. “But I think it is very fair to say that we will not see another two or three years of 16-to-20 percent appreciation.”
SIDEBAR
Top Recognitions & Rankings
1st Highest high-tech start-up density of any metro area in the U.S. // Kauffmann Foundation
America’s Startup Capital and America’s Startup City // Inc. Magazine
Best Place to Live in America // U.S. News & World Report, 2020, 2021
2nd Best Place to Live for Quality of Life // U.S. News & World Report, 2021
7th Safest Places to Live // U.S. News & World Report, 2020
Most Fitness-Friendly Places // SmartAsset, 2019, 2020
America’s 10 Best Small Cities // Travel Pulse, 2020
College Football’s Greatest College Towns // Sports Illustrated, 2019
Top 20 Tech Towns // CompTIA, 2018
20 Best Small Cities in the U.S. // National Geographic Traveler, 2018
SIDEBAR
Top Tech Employers in Boulder
Boulder’s economy has remained remarkably stable throughout the COVID-19 pandemic and other economic downturns in recent history in large part because of the local presence of big tech employers. These companies are highly recession- and pandemic-resistant due to the ability of most employees to perform work functions from home and increased demand for products regardless of economic swings. There are 862 information technology firms in Boulder employing more than 10,000 people at an average wage in excess of $116,000 annually.
In 2020, Boulder was named by SmallBusiness-Prices as “the most promising city in the world in which to live and work for those seeking entrepreneurial opportunities,” in large part because of its extremely fast internet speeds and an “abundance of startups and investors.” Below is a partial list of the top tech employers in Boulder, Colorado:
» Verily Life Sciences (Google healthcare technology subsidiary)
» Nest (Google smart home developer)
» Amazon
» Apple
» Lexmark
» Misty Robotics
» Oracle
» IBM
» JumpCloud
» Agilent Technologies
» Cisco
» Gorilla Logic
Top 13 Boulder Employers
According to the Boulder Home Source, 13 companies employ about 48,000 individuals in the Boulder area. These companies are:
» Agilent Technologies
» Ball Aerospace
» Cisco
» Emerson Electric/Micro Motion
» General Electric
» IBM
» Lockheed Martin
» Microsoft/Bing
» Northrop Grumman
» Oracle
» Qualcomm
The Boulder economy also supports a large health sciences community of employers, including Array BioPharma, Boulder Community Health, and Corden Pharma. The city also hosts more than half of Colorado’s federally funded labs and the University of Colorado’s public research university. This contributes more than $1.5 billion to the local economy.
