Heavy-weight national real estate experts, from Sam Zell to Richard Rainwater, are bullish on Denver. And so are local experts, many who struggled through the overbuilding, high vacancy rates and low rents of the energy collapse of the 1980s.

But it's not a run-away bull, like the frenzy in the early days of the oil boom in the 1980s, which crashed as quickly as it came.

Consider the reasons for optimism:

* Thousands of acres around the Denver International Airport, the newest giant airport in America, are finally living up to the hype promised almost a decade ago.

* Downtown Denver, which has had trouble keeping its office space filled, is fuming into an entertainment mecca, with an amusement Dark at its edge. the Lower Downtown former warehouse neighborhood, where $1 million lofts are available, and two entertainment projects.

* Park Meadows, the $164 million regional mall developed by San Diego-based Hahn Co., brings the first Nordstrom to the state and the first Dillard's to the metro area. The mall, the most recent one to open in the nation, is considered a model for future huge shopping centers across the country.

* Vail Resorts Inc. agrees to buy three other Colorado ski resorts -- Keystone Arapahoe Basin and Breckenridge -- in a $310 million deal, creating the largest ski resort conglomerate in North America.

The only area that experts are bearish on, to any extent, is the big-box retail explosion in the suburbs. As with most cities across the country, there is the fear that market is becoming glutted.

But with a diversified economy no longer dependent on oil and energy as it was a decade ago, inmigration that is exceeding projections and one of the best-educated work forces in the country, the area's economy appears in no danger of a correction.

Retail driven by entertainment

"Denver is on a roll," says Denver Mayor Wellington Webb, crowing about the city's efforts to rejuvenate downtown and infill developments around it.

"It's just one thing after another," Webb said at the ground breaking for the long-awaited retail center at the Colorado Center.

The center, being developed by George Thorn, principal of Denver-based Mile High Properties, will include the first Dallas-based Dave & Buster's "eatertainment" developments in the area, a Cucina! Cucina! restaurant from Seattle and a 12-screen United Artists movie theater.

Webb also points to the Fashion Pavilions downtown, a $95 million project with other retail firsts, such as a Hard Rock Cafe, Nike Town, Virgin Record super store, two Wolfgang Puck restaurants and another United Artists theater.

"There aren't many cities where I would go downtown," Bill Denton, president of Los Angeles-based Entertainment Development Group, says. "In most metropolitan areas, I'm looking at the suburbs."

Doug Jones, president of Denver-based Jones Realty Group, says downtown is changing from a pure office market with the renovation of buildings into other uses. "A large percentage of former office space is currently being leased to the retail, hotel, entertainment and residential segments," he says. "That trend will continue."

David Tryba, the Denver architect who is designing the Stadium Walk/St. Charles Place mixed-use development -- the name of Schwarzenegger's project -- says it will be much more of a neighborhood development than the Pavilions.

"Everyone thinks the two are the same, but they're quite different," Tryba says.

"Sure, they have Hard Rock, and we have Planet Hollywood, but that's where the similarity ends. We'll have about 10.0 housing units and a neighborhood-type grocery store and a movie theater that will make a commitment to some art-house films."

Golden Triangle blooms

For the past couple of years, the warehouse district around Lower Downtown, known as LoDo, has been the hottest neighborhood in Denver.

At the other end of downtown is the Golden Triangle, which is near the recently renovated Denver Public Library and the Denver Art Museum.

Bruce Berger, a transplanted New York City developer, is the largest landowner in the Golden Triangle. He is putting the final touches on his 58-unit Metropolitan Lofts project, where units sell for an average of $135 per sq. ft., far less than you would pay in LoDo.

"The Golden Triangle is a blank slate," Berger says. "We are filling in the pieces. It will be a neighborhood that is the Avenue of the Arts."

His plans call for office buildings, more lofts, retail, a luxury apartment high rise and a new park. He plans to dot the area with sculptures borrowed from the art museum.

Berger believes that the Golden Triangle can surpass LoDo as a place to live. "A cultural base is far more attractive than ballfields and sports bars," he says.

Mile High Properties' Thorn, a 25-year veteran of the Denver commercial real estate scene, sees a bright future not only for his project, but for the entire metro area.

"I'm very optimistic," Thorn says. "But, I'm a realist. Two years ago, I was cautiously optimistic. Last year, I was a little more optimistic. Now, I'm looking at a very healthy market."

His only concern is the potential overbuilding of power centers. "That is getting a little bit scary and overbuilt," Thorn says. "But I think we're going to see an easing of power centers."

Suburban office outperforms downtown

"The office market in Denver continues to be very segmented and distinct," says Stephen F. Clarke, president and CEO of PrimeWest, Denver. "Two of the stronger office markets are southeast suburban and northwest suburban as well as west Denver."

John Cushman III, founder of the Los Angeles-based Cushman Realty, joined in the chorus of praising Denver during a National Association of Industrial and Office Properties seminar here.

"Denver has a balance that most American cities lack," Cushman said. "While the suburban Tech Center area (south of downtown) has had explosive growth and has higher office rates and lower vacancies, downtown doesn't have any problems with crime and other problems associated with many cities."

But clearly the southeast suburban office market is stronger. "The Denver real estate market is performing as well as it has in 10 years, led by the southeast office market," says V. Michael Komppa, president of Corum Real Estate Group Inc., Denver. "Our flagship property, One DTC, is getting rental rates in the mid-$20x, and space is leased as soon as it becomes available. The current crop of speculative buildings confirms that rents have reached the level of justifying replacement costs."

"The southeast suburban office market is benefiting from both the office expansion of existing tenants as well as inmigration of new tenants and industries, such as Merrill Lynch, John Hancock Insurance, ICG and J.D. Edwards," says Clarke.

Denver captures outside investor interest

Fort Worth-based Crescent Real Estate Equities Ltd. has made a $275 million investment in Colorado commercial real estate. Its 2 million sq. ft. portfolio includes Class-A buildings in downtown Denver, the submarkets of Cherry Creek and the Denver Technological Center and the Hyatt Regency Hotel in the ski resort of Beaver Creek.

"We're different than Sam Zell in that we do not buy buildings that are 50% or 60% leased," James Wassel, senior vice president of Crescent said at the same conference. Instead, it focuses on buying first-class buildings that can't be replaced.

"We would like to make more Denver Tech Center purchases," Wassel said. "And, our Briargate Office and Research Center near the Air Force Academy in Colorado Springs is performing well. Richard (Rainwater) doesn't do little things."

Rainwater likes Denver's downtown more than Dallas' CBD, even though Dallas is in his backyard.

Sam Zell, the famed Chicago investor, owns three Denver Tech Center high rises and is hungry for more Denver real estate. Zell bought the Denver Corporate Center, Prentice Plaza and the Quadrant in the late-1980s and early-1990s for bargain prices. The properties were purchased through Zell's Equity Office Properties LLC, a $600 million joint venture with Merrill Lynch.

The Quadrant, one of the largest buildings in the southeast corridor, was its best purchase. It was purchased in 1992 when it was 73% leased for $85 per sq. ft., or $26.5 million. Today, it is more than 95% leased and probably would fetch north of $130 per sq. ft., based on recent sales.

"We're very excited about Denver," says John Gallander, vice president-regional director for Equity Office Properties. "When we look at the job growth numbers, diversity of the economy and the overall demographics, we are very pleased from an office stance. We're always looking and evaluating. Certainly, the better opportunities appear to be downtown."

On the industrial side

"Activity in the industrial market is as good as I have ever seen, and the development community is responding with a number of new projects on the drawing board," Komppa says. His firm is nearing completion of a 306,400 sq. ft. speculative building in the Denver Business Center that was undertaken with Lincoln National Life.

One of the most active areas is around the Denver International Airport (DIA) in northeast Denver. Millions of square feet of industrial properties are under construction or on the drawing board. Bill Pauls, general manager of the Denver Tech Center, bought 1,200 acres with General Electric, and recently announced plans for two office buildings and six new hotels on the land.

"This could end up being the finest multi-use community along the Front Range," Pauls says. "It will have places where people can enjoy themselves. It will not be an ordinary business park."

"The market between the former Stapleton Airport and DIA continues to have the lowest vacancy rate of approximately 4% and is also seeing the most developments, with approximately 700,000 to 1 million sq. ft. coming on line in the next 12 to 18 months," agrees Clarke.

Local investors still active

One of the largest local investors has been Pacifica Holding Co., which has a $300 million, 7 million sq. ft. portfolio of office, industrial and retail projects.

"The market is strong in the overall sense," says Steve Leonard, president of Pacifica, which is building 10 projects from the Boulder area to the southeast corridor that will cover about 650,000 sq. ft. and will have a value of more than $50 million.

Another active local investor has been Bruce Etkin, chairman of Etkin Equities Inc. He paid $41.27 per sq. ft. for an 86,020 sq. ft. office/warehouse. Etkin estimates the replacement cost is $60 per sq. ft., giving him a "total cost/replacement cost ratio of 68%."

"The major change in the marketplace," Etkin says, "is that, contrary to the early '90s when we were buying buildings on unleveraged returns of 10% to 12% with 30% to 70% vacancy factors, we are now buying fully leased buildings at 10% to 11% returns and 50% to 70% of replacement cost."

"Everything is solid," says Rick Pederson, senior vice president of Denver-based Frederick Ross Co. "I cannot find any lapses in the market. All products in all markets are looking strong, although some could look askance at the downtown office market."

Like Pederson, Brad Neiman, first vice president of CB Commercial's Denver office, says he has never seen the market as healthy as it is today. "Generally, the market is showing incredible strength," he says. "The vacancies in all product types continue to drop, and limited new development is taking place. It is being driven by the needs of companies."

In fact, investors snapped up a record $283 million in the first half of the year in those product types, according to a study by Neiman.

The one development that best captures the strength of the market is the $164 million Park Meadows regional mall by the San Diego-based Hahn Co. that opened in late August.

Instead of the traditional boutiques inside, many of the stores are in the neighborhood of 20,000 to 40,000 sq. ft. By late July, the 1.5 million sq. ft. mall was more than 90% leased. "This is the mall of the future," says Alberta Davidson, Hahn's spokeswoman. "This mall will help change the essence of the whole industry. Physically and architecturally, it is more like a resort than a mall."

Rest of state continues growth

Colorado Springs is much like the Denver market.

"1996 will be remembered as the year that speculative construction began in the Pikes Peak region," says Brett Dayberry of Colorado Springs-based Palmer McAllister, a Frederick Ross company. "Several years of back-to-back population growth have created demand for retail and multifamily housing developments," he says in a midyear report.

Excluding three nontraditional office buildings on the market, the office vacancy rate is only about 5%, the company reports.

One of the biggest developments in Colorado Springs is the $35 million Pikes Peak International Raceway under construction. It is being built by C.C. Myers, the famed Sacramento, Calif.-based contractor.

Meanwhile, the rest of the state, for the most part, is also booming.

Vail plans to spend at least $20 million a year marketing and promoting its new ski empire if the government approves its purchase of the three ski resorts in Summit County, which it is buying from St. Louis-based Ralcorp Holdings for $310 million.

Corum Real Estate Group Inc. is building affordable rental units in the mountains, so teachers, police, fire fighters and others who can't afford million-dollar-plus homes can continue to live there.

They've already built the 270-unit Lake Creek Village in Edwards, near Vail, and the 104-unit Mountain Village Apart' meets in Steamboat Springs. Corum recently broke ground on the 74-unit Pinewood Village Apartments in Breckenridge.

"Exorbitant rents plague most of our mountain resort communities, making it extremely difficult for low- and middle-income workers to find affordable housing close to where they work," says Jamie Fitzpatrick, vice president of Corum. "Through innovative financing and our experience developing strong public/private partnerships, we're able to bring these communities realistic housing solutions."