Manufacturing losses and military cuts loom as concerns for Colorado Springs, economist says

By Rich Laden Updated: January 30, 2014 at 6:51 pm • Published: January 30, 2014 | 5:40 pm 0

The Pikes Peak region's economy has rebounded from the local and national recessions, yet dwindling numbers of manufacturing jobs, few prospects to add any such employers and uncertainty about possible Department of Defense spending cuts remain major concerns for the area, according to University of Colorado at Colorado Springs economist Fred Crowley.

Crowley was the keynote speaker Thursday at the 23rd annual economic forecast breakfast of the Institute of Research Management's Southern Colorado chapter, where he recapped the good - and bad - of the local economy.

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Rising numbers of motor vehicle purchases - about 25 percent of which are being made by members of the military returning from deployments - and a 40 percent gain in health care industry jobs since 2000 have been major pluses for the local economy, Crowley said.

But, he said, the Pikes Peak region's business conditions index continued to be flat during the latest measurement period last summer and is forecast to rise only slightly in the next year. The index measures employment, wages, home building and other economic conditions in the area.

Likewise, the Colorado Springs area shows no signs of adding significant manufacturing jobs after having lost about 55 percent of its manufacturing employment base over the last 13 years, he said. The rest of the nation lost 30 percent to 35 percent of its manufacturing jobs during the same period, he said.

Manufacturing job losses are especially troublesome because they pay well, bring wealth and investment into the community and create spin-off jobs, Crowley said. Other communities have seen a recovery in their manufacturing sectors, but not the Springs, he added. Of replacement jobs coming to the area, many are lower-paid, service-sector jobs.

"Manufacturing jobs are growing every place except for here," Crowley said.

Meanwhile, the Springs area still faces spending cuts that could affect the military economy, Crowley said. The Defense Department is supposed to cut $50 billion a year as a result of sequestration, he said, while another round of domestic base realignments and closures scheduled for 2017 also could mean cuts for the Springs.

Area military installations have avoided drastic cuts in previous base downsizings, but "are we going to be that lucky again?" Crowley said.

Four other speakers at Thursday's breakfast also touched on other areas of the Springs economy and real estate industry:

- Home sales and prices were up noticeably in 2013 compared with 2012, although sales slowed in the fourth quarter of last year, said Bruce Betts, broker-owner of Re/Max Advantage in Colorado Springs. The market was boosted by a strong demand and relatively low supply of homes on the market, a reduction in distressed properties and affordable borrowing rates, among other factors.

In a realistic scenario, home sales and prices should increase about 5 percent this year, as the market continues to recover, Betts said.

- A slow recovery last year in the commercial real estate market should continue in 2014, said Brian Wagner, a managing director with Sierra Commercial Real Estate in Colorado Springs. Nearly 30 percent of all Class A - or top-of-the-line - office properties were bought and sold last year, a sign that investors have confidence in the Springs market, he said.

Still, he said, don't expect much new construction in the commercial market this year until the area sees more jobs - a big challenge because the Springs continues to compete for employers with Austin, Salt Lake City and other communities, Wagner said. Squabbling among local elected officials is getting noticed by out-of-town employers considering the Springs as a place to do business, Wagner said - a warning that brought applause from the approximately 300 members of the business and real estate community in attendance.

- The apartment market remains hot, with a 5.4 percent citywide vacancy rate that's the lowest in 12 years, said Doug Carter, a local commercial broker with national real estate company Sperry Van Ness.

- One potential boost for the economy: The $250 million City for Champions tourism initiative, which would use $120.5 million in future state sales tax revenue as a major funding source, said Bob Cope, of the Springs' Economic Vitality Division. City for Champions supporters say development of four tourism projects - a downtown Olympic museum and sports and events center, a new Air Force Academy visitors center and a UCCS sports medicine and performance center - would create 5,100 jobs, a little more than half of them permanent, he said.

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Contact Rich Laden: 636-0228

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