Page 18
— Multifamily Properties Quarterly — July 2015
Market Driver
M
etro Denver’s boom in apart-
ment construction has raised
concerns that the market
could become overbuilt, but
with the region’s population
explosion, that fear is likely unfounded.
Metro Denver has a population of
more than 2.9 million people and a
growth rate that has consistently out-
paced the national rate every decade
since the 1930s, according to the Metro
Denver Economic Development Coun-
cil. By 2020, the region's population is
expected to increase to more than 3.3
million people.The influx of people,
especially millennials, created demand
for additional apartment units, but
they come at a high price.The influx of
people, largely a result of the region’s
attractive lifestyle and the number of
available jobs, continues to push rents
higher and vacancies lower.
The overall average rent for the last
10 years increased from around $800 in
2002 to more than $1,168 this quarter,
even though vacancy rates ticked up
slightly to 4.9 percent, compared with
4.7 percent during the fourth-quarter
2014, according to the first-quarter
Denver Metro Area Apartment Vacancy
Survey by the Apartment Association of
Metro Denver.
More than 19,000 apartment units
started construction in 2012 and 2013 –
the most the market has seen in more
than 40 years – and developers are con-
tinuing to build.
The redevelopment of Union Station
spurred a flurry of multifamily develop-
ment on the 19.5 acres surrounding the
historic building, which now is home
toThe Crawford Hotel and a variety
of restaurants and shops.There’s
Cadence, a 219-unit building west of
the station; Elan, a 307-unit building;
andThe Platform, a 288-unit tower.
And it is not just Denver’s center that
is experiencing the
boom. Neighbor-
hoods surrounding
downtown such as
Cherry Creek, tradi-
tionally an enclave
of high-end for-sale
condos and homes,
is seeing apartment
projects like the 218-
unit Steele Creek
at First Avenue and
Steele Street pop
up. Developers also
are flocking to River
North, Lower Highlands and Highlands
to build apartment communities.Tram-
mell Crow Residential, for example,
recently paid $9.34 million for about
two acres atWest 38th Avenue and
Lowell Street for AlexanWest High-
lands, a 324-unit complex with comple-
tion expected in about two years.
Land surrounding any of the region’s
light-rail stops also is at a premium,
with developers furiously building
apartment communities for residents
who like the idea of ditching their cars
and commuting downtown by train.
The city’s strategic plan for transit-
oriented development takes a system-
wide approach to developing a sense of
place around rail stops, including resi-
dential projects like Garden Court, an
affordable housing project under con-
struction near theYale light-rail station.
The influx of people to the region
certainly is creating the demand for
apartments, but other factors are
contributing to the multifamily con-
struction boom. Colorado’s onerous
construction defects lawmakes it easy
for homeowner associations to sue
developers for faulty work without giv-
ing them a chance to rectify problems
as they arise. So, instead of building
for-sale condos, many developers have
turned to apartments, with the intent
of converting them to condos after
seven years, at which point they can no
longer be held liable for defects.
Business leaders across the state
have tried for years to get legislation
passed that would ease the burden of
lawsuits against developers, but the
bills ultimately were killed in com-
mittee. Proponents of revising the law
say they expect the fight over defects
lawsuits to shift to cities. Lakewood
already has passed a measure giv-
ing developers and builders a right to
repair defects before facing litigation
and requiring condominium asso-
ciation boards to get consent from a
majority of homeowners, rather than
just the majority of the board, before
filing suit.
Another factor contributing to the
surge in apartment construction is the
lack of for-sale housing. Many people
are choosing to rent apartments
because the combination of high home
prices and lack of inventory is keeping
them out of the ownership market.
Nationally, there is a 5.3-month supply
of housing inventory but metro Den-
ver has only a 1.28-month supply for
single-family homes and 0.81 months
for condos, according to a recent report
from the Denver Metro Association of
Realtors.This is pushing prices up, as
the average price for a single-family
home rose 4 percent to $420,630 from
May to June.
Metro Denver’s attractive lifestyle
and positive economic climate will
continue to draw people to the region,
creating even more demand for quality
rental housing.The low vacancy rate
and rising rents are sure signs that the
market has not been overbuilt.
s
Jeff Johnson
Principal, Pinnacle
Real Estate
Advisors, Denver
Multifamily Expertise in Action
Our specialized multifamily professionals understand commercial
real estate, capital markets, and the multifamily investor and can
help you find the right opportunities, financing, and advice for your
assets. The JLL Denver multifamily team has completed over $247
million in transactions so far in 2015. Will your asset be next?
LET US KNOW HOW WE CAN FOCUS ON YOUR INVESTMENTS
AVAILABLE
AVAILABLE
AVAILABLE
SOLD
SOLD
SOLD
Park Place at 92nd - 228 units
Sunset Peak - 184 units
Sterling University Peaks - 96 units
Flats at Creekside Park - 120 units
The Grove at City Center - 420 units
Riverton on the Platte - 316 units
Courtesy: Terry Shapiro
Multifamily construction is booming throughout metro Denver including Steele Creek in
Cherry Creek.
