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COLORADO REAL ESTATE JOURNAL
— March 16-April 5, 2016
Personal Approach
Trusted Solutions
Multifamily
mark for that type of property.
But it’s urban communities
that command the highest price.
For example, in late 2015, the
ARA Newmark team sold One
Observatory Park, a high-rise
adjacent to the University of
Denver, for $387,324 per unit.
That represents the most ever
paid for a nondowntown apart-
ment property in Denver.
One reason that apartment
units cost more today is because
they are increasingly expensive
to build.
Mike Zoellner, who has built
thousands of units in the Denver
area during the past decades,
understands that all too well.
"When I built my first apart-
ment property in metro Denver,
our cost was $25,000 per unit
for an ‘A’-quality building,” said
Zoellner, president and CEO of
Denver-based RedPeak Proper-
ties.
“Today, an ‘A’-quality build-
ing would cost over $250,000 per
unit to build,” Zoellner said.
ARANewmark also celebrated
a record year in 2015.
The Denver office of ARA
Newmark accounted for 46.2
percent of the total dollar volume
in sales in 2015.
“Our office closed $2.05 billion
in apartment sales in 2015 and
$1.45 billion in 2014,” Hawks
said.
To put that in perspective,
ARA Newmark closed $3.5 bil-
lion in apartment sales in two
years, which is almost equal to
the $3.93 billion in sales from
1990 to 1999, when 113,478 units
traded hands.
Last year, the total sales vol-
ume was about 12 percent higher
than the entire decade of the
1990s.
The main difference between
the 1990s and now is the price
per unit.
The average price per unit in
1990 was $34,154, ARA New-
mark’s research shows. Last year,
the average price per unit paid
by an investor was $135,283, a
296 percent jump over 15 years.
Apartment values have risen
far above the inflation rate.
In today’s dollars, the price
paid for an average apartment
unit in 1990 would be $61,909,
when adjusted for inflation.
One buyer who has witnessed
the increase in apartment values
rise is Ed Anderson.
“Like in other parts of life, the
one that got away is the one you
remember most and I have a
few of those investments,” said
Anderson, principal of Connex-
ion Asset Group, a Colorado-
based investment company.
He recalls working with
Hawks to buy two properties
in 1990.
One was priced at $3.1 million
and he offered $3.05 million. He
lost the sale to a buyer who paid
the asking price.
“Jeff (Hawks) currently has
that property listed for $42 mil-
lion,” Anderson said.
Anderson shouldn’t feel bad
about walking away from what
could have been a 1,255 percent
return if he paid the original ask-
ing price and held on to the
property for 15 years.
He is far from alone.
“I have hundreds of stories like
that over the last 40 years in
the brokerage business,” Hawks
said.
What was true in 1990 is true
today, if you take a long-term
view.
“My usual response to a buyer
protesting about an asking price
is, ‘Which one of my overpriced
listings from 2010 would you
want now?’ To make money in
apartments, all you have to do is
buy and hold on,” Hawks said.
That doesn’t mean that apart-
ment prices can’t, or won’t, go
down.
Indeed, the painful memo-
ries of the Great Recession are
still fresh for many. During that
stretch, which began in 2007 and
bottomed in the spring of 2009,
prices collapsed and investors
had little appetite for Denver-
area apartments for a few years.
In retrospect, of course, that
was a great buying opportunity.
The bounce back is what long-
time observers of the market, like
Hawks, expect.
“Never in history has Denver’s
residential real estate market
went down and stayed there,”
Hawks said.
However, what is true in Den-
ver is not necessarily the case in
other markets across the country.
“You have to be in a market
that is growing,” Hawks said.
“The demand for housing is
directly related to population
growth,” he said.
“Denver, along with many
major cities in the U.S., seems to
have a ‘long runway’ due to the
inmigration and internal popula-
tion growth,” Hawks said.
Demographics are on the side
of continuing rising apartment
values, he said.
“Colorado has nearly seven
kids an hour turning 21 and six
people an hour moving from out
of state,” Hawks said.
“That translates into demand
for housing,” Hawks said.
Many of them are members
of the millennial population,
a group bigger than the baby
boom generation, he noted.
The Metro Denver Economic
Development Corp. estimates
that 833,000 of Denver metro's
population of more than 3 mil-
lion are between the ages of 17
and 33. Nationally, 35 percent of
those millennials are still living
at home.
"This means that there are
more millennials living at home
in Denver than there are apart-
ment units in Denver,” Hawks
said.
Andrews, also a vice chairman
at ARANewmark, agrees.
Although there have been
recent concerns about overbuild-
ing, there may not be enough
units to meet future demand.
“Think about it,” Andrews
said. “Where will they all live?”
He noted there are currently
18,000 vacant units on the mar-
Source: ARA Newmark
This graph shows the historic increase in apartment sales volume in the
Denver area.
Source: ARA Newmark
This graph shows the historic increase in price for apartment units in the
Denver area.
