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Page 6 — Multifamily Properties Quarterly — May 2021 www.crej.com Market Update W hen the headlines start to flash, “The most desirable place to live to in the U.S.” (U.S. News &World Report, 2019); “Fastest Growing City for Millennials” (Brookings Institution, 2018); and “5th Best City to Find a Job” (WalletHub, 2019), people take notice. Not only do local residents, future employers and waves of new residents consider how to be part of such a story, but so do new investors seeking out- size returns, particularly in the multi- housing space. In few places has that been on greater display over the past few years than in Colorado Springs. Colorado’s second-largest city and the beautiful southern anchor to the Front Range population corridor is no secret to those who have been here for years but often is overlooked by out-of-state capital drawn to its heavily transacted neighbor to the north. It seems that trend is no longer. As the pandemic flattened apartment transactions around the country, Colorado Springs is smashing records in transaction vol- umes and pricing while enjoying rent growth that would be remarkable even in a “normal” year. Colorado Springs defied conventional wisdom in 2020 by setting a record for multihousing transaction volume during a global pandemic unlike anything the market has ever seen. During this past year of cautious investment and uncertain capital, the total transaction volume was $685.4 million, a 50% increase over 2019. Beyond sheer volume, the market also saw theVolta at Voyager multihousing property sale breaking a price-per-unit record at $263,000, only to be outmatched by Blue Dot Place in downtown Colorado Springs and Overlook at Mesa Creek in the suburbs within less than six months. Impres- sive rent growth, stable occupancies and limited new supply have been music to the ears of new investors, especially consider- ing challenging fun- damentals in some coastal markets and heavy competition for deals in Phoenix, Denver and Austin, Texas.This has brought the market to the forefront of major capital sources across the coun- try as many of the trades in 2020 were new entrants to the market and many others continue to chase opportunities aggressively. Ranked No. 3 by Multi-Housing News’ Top 10 Emerging Multifamily Markets in 2020, it is not a surprise that Colorado Springs has seen outsize activity even during a pandemic and recession. Since 2010, the population growth in Colorado Springs was 15.5%, more than double the national aver- age of 6.3%.This growth coupled with extraordinary rent growth of 6.2% in fourth-quarter 2020, strong occupancy at 95.5% and a manageable construc- tion pipeline of just over 8,000 units in various stages, means Colorado Springs checks all the boxes for investors eager to deploy capital in Colorado and the western U.S.This is evident when look- ing at average price-per-unit sale price and cap rate in the first quarter of 2021 compared with the 10-year average for the market.The average price per unit in the first quarter was $178,591, a 60% increase over the 10-year aver- age of $111,511, while cap rates are down 166 basis points to an average of 5.07% when compared with the 10-year average of 6.23%.Though long- time Colorado Springs investors may wince at some of those numbers, many out-of-state investors are rushing to take advantage of the market before its relative yield goes the way of other secondary markets west of the Mis- sissippi. By way of example, Denver’s average price per unit was $272,007 and the average cap rate was 4.68% in the first quarter.The stark contrast in value and yield between the dueling Front Range giants should continue to fuel the voracious appetite for apartments, especially as capital gets pushed out of larger markets. With all the investor appetite and the desire to deploy capital into the market, there is at least one hurdle: opportunities. Historically, owners in the Colorado Springs market have been long-term focused and well entrenched in their investments. And because the highest transaction volume year before 2020 was 2017, at $623.6 million, a significant portion of potentially trans- actable deals is encumbered by debt that is unattractive when compared with the historically low rates we see in the market today. However, capital has proved interested in newly constructed assets in Colorado Springs, with 10 transactions since 2019 of communities built after 2010. According to Apart- ment Insights, there are 13 projects under construction in the market with three scheduled to start, three in the final planning stages and 21 in the early stages of proposal, which will create intriguing oppor- tunities for capital to invest in high-quality product over the next few years, even if it keeps the flow Springs builds on 2020’s transaction volume record Chris White Director, capital markets, JLL Mack Nelson Director, capital markets, JLL JLL Research, CoStar Please see White, Page 34