Guest column: a statewide tour of the economy
News regarding the state of the economy has taken center stage since we entered the recession in 2008. The upside of this focus is that many Colorado businesspeople have become astute observers of the economy.
To supplement economists' insights, we've gathered some thoughts from Vectra Bank Colorado market presidents and customers throughout the state. With 40 offices across the state, including the urban Front Range, mountain resorts, the Western Slope and the Four Corners region, we've been able to garner a unique and close-up look at how the economy is really affecting people in Colorado.
Echoing what we've heard on a national basis, the economy appears to be a mixed bag. While the tourism industry remains down by 15 percent to 20 percent, travel to and within Colorado appears to be picking up. Aspen, for example, is seeing reservations for summer ahead of where they were at the same time last year. They've also reported an increase in tourists from Europe and South America in the Aspen area due to the favorable currency exchange rates.
Recreation is obviously important to Coloradans as well, with many choosing to spend their vacations here to enjoy less expensive outdoor activities. As further evidence of this trend, our customers in the outdoor gear industry have seen little negative impact on their sales over the past year. Skiing is a mixed bag, with some areas reporting a slight increase in ski days over last year, and other areas remaining flat or down.
The housing market is still suffering, with entry-level homes clearly leading home sales. In Grand Junction, a home builder tells us that entry-level homes are the only new starts, and that homes priced between $150,000 and $300,000 are more likely to be sold. This is echoed in Farmington, N.M., where the market has a glut of homes, but less-expensive homes have held their value better.
Colorado Springs is in a similar position, with military families snapping up the lower-priced homes on the south side of town. Areas with a strong second-home and luxury-home market, such as Steamboat Springs and Durango, have seen those home prices fall by as much as 50 percent. However, in the metro area, prices have begun to stabilize. Arvada, Louisville and Westminster are the communities to watch, reporting more new home building than in other areas of town.
The decline of the oil and gas industry has hit some areas hard. Durango has felt the effects of this decline, but not to the extent of Grand Junction. While more than 100 oil rigs were operating in the area in 2008, almost overnight that number dropped to fewer than 30. This alone caused a dramatic contraction in the city's economy, including retail closures and a steep decline in home prices. In fact, those in residential real estate in Grand Junction predict it will be 10 to 15 years before home prices recover.
Also in Grand Junction, one large commercial real estate developer, like many developers in this region, secured land during the boom times of 2005-2008 for a new shopping center but is now letting those contracts expire. This downturn in commercial real estate is echoed in Aspen, where commercial and retail lease rates are off 30 percent to 50 percent.
As you can see, concerns remain about the economy and certain sectors throughout the state. We've definitely got a ways to go before returning to normal, or more accurately, the new normal. The economy won't function as it did in the past. But in addition to the positive news regarding travel and recreation, our conversations also revealed another bright spot.
Almost all of the people we talked with pointed out that while they are still concerned about modest job growth, the companies that are highly focused, specialized, committed to reducing costs and identifying new ways to run their business continue to do very well.
By remaining vigilant about expenses and flexible in regard to niche markets and new opportunities, Colorado companies will survive and thrive in the "new normal."