Connecting the dots: Indicators reflect improving business conditions

Higher sales and use tax collections, increasing real estate activity and a lower unemployment rate are among the indicators pointing to improved business conditions in Mesa County during the first half of 2017 compared to the same span a year ago. Local business leaders expect the upward trend to continue. (Business Times illustration by Phil Castle)
Higher sales and use tax collections, increasing real estate activity and a lower unemployment rate are among the indicators pointing to improved business conditions in Mesa County during the first half of 2017 compared to the same span a year ago. Local
business leaders expect the upward trend to continue. (Business Times illustration by Phil Castle)

Phil Castle, The Business Times

Jon Maraschin jokes that he can’t remember what the first half of the year was like for business activity in the Grand Valley — he was too busy.

Although the comment might sound like a Yogi Berra contradiction, there’s also a serious and telling side to the observation. Maraschin, executive director of the Business Incubator Center in Grand Junction, cites a correlation between increased demand for services at the center and improving business conditions. In other words, if Maraschin’s busy, there’s a good chance local businesses are too.

In fact, Maraschin’s experience isn’t unique or even unusual. Take, for example, Dale Beede, a broker associate with Coldwell Commercial Prime Properties in Grand Junction.
Or, for that matter, other commercial real estate brokers working in the local market, Beede says. “We’re all busier than we thought we were going to be.”

Economic indicators for the first half of 2017 affirm all that busyness with year-over-year increases in sales, use and lodging tax collections as well as real estate transactions and dollar volume.  The number of single-family building permits issued in Mesa County during the first half of 2017 was up more than 44 percent over the first half of 2016. While the monthly unemployment rate spiked again in June in Mesa County, a small than usual gain left the jobless rate  2.5 points lower than this time last year.

It’s not so much the boom that preceded the bust in the Grand Valley is back. Rather, conditions are slowly improving at what appears to be a sustainable pace, says Diane Schwenke, president and chief executive officer of the Grand Junction Area Chamber of Commerce.

Baring any unforseen circumstances, the second half of 2017 should prove as good for business as the first half, Schwenke says.

Maraschin agrees: “I don’t think it’s going to slow down anytime, soon.”

Sales and use tax collections increased in the Grand Valley during the first half of 2017.

The City of Grand Junction collected $25.3 million in the first half of 2017, an increase of 3.7 percent over the first half of 2016. Mesa County collected more than $15.6 million during the first half of 2017, a 4.1 percent gain over the first half of 2016.

Lodging tax collections in Grand Junction — a measure of hotel and motel stays as well as tourism business — totaled $580,530 during the first half of 2017, a 2.5 percent increase over the same span in 2016.

Real estate activity also has accelerated in Mesa County. For the first half of 2017, 2,547 transactions worth a combined $601 million were reported. Compared to the first half of 2016, transactions increased 16.7 percent and dollar volume rose 20.4 percent. The median price for residential properties sold in Mesa County during the first half of the year rose 9 percent to $215,000.

Robert Bray, chief executive officer of Bray Real Estate in Grand Junction, says the year-over-year gains in real estate activity exceeded his expectations. “I’m surprisingly pleased with the numbers. They’re higher than I thought they’d be.”

Dwindling inventories of existing homes for sale have limited selection and pushed up prices. But new home construction has helped fill the gap, Bray says. Mesa County issued 320 building permits for single-family homes during the first half of 2017, a more than 44 percent jump over the first half of 2016.

The seasonally unadjusted unemployment rate rose three-tenths of a point to 3.6 percent in June. The jobless rate typically spikes in Mesa County as seasonal hiring for construction and landscaping tapers off even as college and high school students enter the work force in search of summer jobs. The increase was smaller this year, however, than a jump of nearly a point last year to 6.1 percent. Moreover, jobless rates have remained below 4 percent for four consecutive months and near their lowest levels in nine years.

Schwenke says indicators reflect improving business conditions. “It’s very positive, overall, for us.”

Moreover, there’s a growing realization among the business owners and managers with which Schwenke talks that things are getting. “There’s a lot more optimism about the local economy and where it’s headed.”

The manufacturing sector in particular is doing well, she says. The chamber assisted two manufacturers in gaining approval from Mesa County for rebates on business personal property taxes. Two more requests are expected this year. That’s a reflection of local businesses expanding operations and buying new equipment, she says.

The construction and health care sectors have fared well, too, Schwenke says. That includes the construction of new health care facilities, among them rehabilitation and assisted-living facilities. There’s even been an uptick in the energy sector in terms of drilling activity, she adds.

Only retailers haven’t fared as well, Schwenke says, a reflection of the national trend toward increased online sales.

Beede says the commercial real estate market was active during the first half of the year in terms of leasing, sales and construction. The market isn’t as heated as it was during the boom years before the bust, but Beede says that’s good. “Its a positive market. It’s a normal market, which is great.”

Demand for industrial space has increased, although demand for office space has lagged, Beede says. While prices have made it more attractive to sell for owners who’ve been holding on to their properties for a while, it’s still a good time to buy, he says.

Meanwhile at the Business Incubator Center, demand for the services offered there has increased 20 percent, Maraschin says. “We’ve had a lot of energy and activity.”

While Maraschin says he keeps tabs on such economic indicators as sales tax collections and labor estimates, he also conducts his own assessments. “We talk to our clients.”

Maraschin says the owners of businesses operating out of the center and using services have told him they’ve got more orders and work and their margins have improved. The rapid growth that’s occurred along the Front Range of Colorado also has benefited the Grand Valley in that businesses here provide products and services there, Maraschin says.

So what does second half of 2017 hold for Grand Valley businesses? Most likely more of the same. “It definitely feels like a trend,” Maraschin says.

Beede says he expects more large commercial real estate transactions to close during the second half even as new development proceeds along such traffic corridors as Patterson and 24 roads. New retail outlets and restaurants will open, but so will new industrial operations, he says.

If there’s a potential headwind to continued growth in the Grand Valley, it’s a tightening labor market. Celina Kirnberger, business services supervisor at the Mesa County Workforce Center, says the labor market has tightened over the past six months, making it more difficult for employers used to choosing from a lot of applicants to even fill job openings. “It really feels like it’s done a 180.”

The overall labor force in Mesa County remains 12,000 below peak employment levels in 2009, and Schwenke says labor demand has rebounded to the point those workers are now needed.

Still, the overall outlook for the second half of 2017 — and beyond — remains upbeat. Schwenke says she’s reluctant to proclaim turning points because of the risk such pronouncements could be premature. But she might change her mind. “This time, it feels different.”