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January 2015 — Multifamily Properties Quarterly — Page 7
R ecord breaking. That’s how
2014 will be remembered in
the Northern Colorado mul-
tifamily industry. All three
cities, Fort Collins, Greeley
and Loveland, posted record rents,
vacancies and sales numbers. As
a tertiary market, the numbers for
Northern Colorado don’t have the
overall impact or attention that
Denver or other major metropoli-
tan markets attract. However, on a
scaled-down view, comparisons of
data show Northern Colorado as
one of the strongest markets, oper-
ationally, in the state, if not nation.
Steady and strong. That was the
message delivered at the Northern
Colorado Business Report’s 2014
Economic Forecast at the beginning
of last year. Through the first three
quarters of 2014, you might say this
was an understatement. Leading
the way, Weld County’s foothold
in the energy realm exploded and
attracted job seekers to major oil
and gas companies, while oppor-
tunistic entrepreneurs started
up companies looking to support
the major energy activities in the
region. Not far behind energy, Weld
County’s agriculture industry had
facets that enjoyed a prosperous
2014.
With a foundation in a more
diversified economic base, Larimer
County enjoyed growth in 2014
through innovation fostered by
incubators like Innosphere (former-
ly Rocky Mountain Innosphere). The
county also saw growth in health
care, professional services and
manufacturing.
All areas in
Northern Colo-
rado experienced
a spike in the con-
struction industry,
with multifamily
being a large con-
tributor. Apart-
ment construction
in the region over
the past few years
is unlike anything
seen since the
1990s and early
2000s. Construc-
tion did not miss any of the local
municipalities: Fort Collins, Greeley
and Loveland. Developers made
the leap to develop in areas con-
sidered more speculative, trying to
capitalize on lower land values and
aggressive growth in the region.
The unemployment rate in
Weld County was at 3.9 percent in
November while Larimer County
came in at 3.2 percent. Compare
this with the state’s unemployment
rate, which decreased two-tenths of
a percent to 4.1 percent.
With oil prices plummeting in
fourth-quarter 2014, many are cau-
tiously watching and waiting to see
if prices stay low and what effect
that may have on the overall econ-
omy, not only in Weld County, but
also across the state of Colorado.
Apartment rents appreciated
more than most anticipated in 2014,
with upward pressure as a result
of increasing home prices and lack
of affordable choices, driven, seem-
ingly, from the scarcity of condo-
miniums and townhomes due to
concerns around the construction
defect law, combined with increased
land and construction costs.
In 2014, Larimer County saw aver-
age rents increase nearly 10 percent
compared with 2013, while Weld
County saw increases around 12
percent. Average rents in Fort Col-
lins hovered around $1,150 per
month in the fourth quarter and
Weld County rents hovered around
$830 per month.
Vacancy rates in Larimer and
Weld counties have remained below
5 percent since 2011. Some areas of
the region spent most of this time
below 3 percent. Fort Collins aver-
aged an annual vacancy rate of 3.5
percent for stabilized properties
in 2014, with most of the vacancy
due to a few larger remodel efforts.
Loveland is experiencing the low-
est vacancies in the region at 2.5
percent, while Greeley has hovered
around an average of 3 percent for
the past year.
Vacancies and rents like these
are sure to attract developers who
wait for all of the market indica-
tors to align. In the last couple of
years, the indicators were all posi-
tive – climbing rents, extremely low
vacancies and difficult barriers to
competitive entry. This attracted not
only regional developers, but also
national players in the market-rate
and student-housing development
worlds. Major projects from devel-
opers like Spanos Corp., McWhin-
ney, Crowne Partners, Scott Ehrlich
and Milestone have added units,
or are planning to add units, to all
markets in Northern Colorado.
The sales volume for 2014 will
be the high-water mark for North-
ern Colorado going forward. At the
time this article was written, sales
volume for 2014 was set to crest
over $260 million. The previous
high, set in 2008 when AIMCO sold
five Northern Colorado properties
as part of a portfolio sale, was less
than half of 2014’s total. The per-
unit average also increased a stag-
gering 167 percent from $54,670 in
2008 to $145,882 in 2014. All of this
happened on a smaller number of
units transferring ownership – 1,777
units in 2014 compared with 2,003
units in 2008. Midway through 2014,
the sales volume was sitting at
$47.7 million, mainly due to a lack
Northern Colorado Update
Brian Mannlein
Vice president,
DTZ, Fort Collins