Page 4B—
COLORADO REAL ESTATE JOURNAL
—
September 2-September 15, 2015
T
here are over 18,000
market-rate units
currently under
construction in the Denver
metro area, according to
ARA Newmark’s second-
quarter construction report.
In addition to the initially
alarming number, there are
another 11,500 units proposed.
While some rise in vacancy is
expected and curbing extreme
rent growth and preserving
Denver’s affordability is
positive, there are three big
trends that are tempering
new deliveries, which will
keep apartment vacancy from
rising to overwhelming levels
– construction delays, rising
construction costs and the
ability to obtain financing.
The general trend that
surfaced over the last several
years is that developments
are taking significantly longer
than expected to reach full
completion. The construction
timeline for an average urban
development over 100 units
that commenced in 2011 was
19 months. Two years later, the
same developments are coming
to completion after 27 grueling
months of construction, an
average extension of eight
months. (Note that this trend
is amplified in denser product
types). The same can be said
for garden developments, as
garden developments that
previously took 17 months to
complete, now take 22 months.
While the construction
schedule delays have pained
developers, they are key to
sustaining low vacancy rates.
The 2014 construction report
from ARA Newmark predicted
that approximately 11,000
units would be delivered last
year. In reality, only 7,000 units
were delivered, mainly because
of overbearing construction
delays. That number was just
below Denver’s absorption for
the year, which allowed vacancy
to fall for the sixth consecutive
year to 4.13 percent, according
to Apartment Insights.
Delays routinely are blamed
on labor shortages and the
new frustration is that general
contractors have no capacity
to take on additional work.
For example, one national
developer requested bids from
three well-established general
contractors for a suburban
garden-style community
proposed in north metro
Denver. All three contractors
declined the opportunity to
prepare pricing, because they
did not have the capacity
to complete a bid, let alone
perform the work.
The rising cost of
construction is contributing
to fewer multifamily housing
construction starts. Consider
that two years ago the average
suburban, three-story garden
community could be built for
Julie Rhoades
Associate, land services,
ARA Newmark, Denver
Charts courtesy: ARA Newmark
