Denver construction permit values soar past $3B
- The value of permitted construction projects in Denver reached $3.27 billion by Oct. 7 and is on track to break 2016's single-year record of $3.65 billion, according to The Denver Post. Up to Oct. 7 last year, the value of permits had reached only $2.62 billion.
- The number of year-to-date permits through the period also increased, with 59,029 issued through Oct. 7 this year versus 50,348 through the same period in 2016. To handle the surge in volume, Denver Community Planning and Development (CPD) hired 29 additional full-time staff this year and said it had cut customer wait time in half.
- The CPD came came under fire from the Denver auditor's office in August for what it characterized as "imbalances in staff training and long wait times." The CPD said its appointment system and e-permitting option has helped streamline operations, in addition to its expanded staff, with most permitting process times now meeting the agency's goals.
In June 2016, the Denver City Council gave the CPD $1.4 million to boost its staff, as well as to hire outside service providers, to help cut through a backlog of building permits and related inspections driven by the area's construction boom.
Construction companies are thriving in Denver, according to Bisnow, in large part because of a continuous stream of young professionals and major businesses migrating to one of the most livable U.S. metro areas. Still, lenders are becoming increasingly cautious with their money as many wonder when the bubble could burst.
Banks are pushing for increased borrower equity as part of their conditions for granting construction loans. Luxury multifamily projects, especially, face tougher competition for loans due to concerns about high vacancy rates and net absorption.
Despite the small decrease in the availability of traditional financing, that trend has allowed life insurance companies, private debt funds and other nontraditional lenders to permeate the market and take up the slack.
David Eyzenberg, president of Eyzenberg & Company, told Construction Dive in April that these "shadow banks" can take on greater risk because they don't have to comply with strict federal banking regulations. Those regulations have classified construction projects as high volatility commercial real estate demanding, in turn, that the lender put up 50% in extra cash reserves for such loans.
Borrowers can pay at least a point higher to nontraditional lenders for construction loans, but many borrowers grab at the chance to get their deals done more quickly.
Follow Kim Slowey on Twitter