December 16, 2015-January 5, 2016 —
COLORADO REAL ESTATE JOURNAL
— Page 7
by John Rebchook
The Denver metro will experi-
ence an unprecedented number
of rental units entering the mar-
ket in the fourth quarter, accord-
ing to a recent analysis byMarcus
&Millichap.
Of the 6,000 units scheduled
for delivery, 1,250 of them will
be in the Downtown/Highland/
Lincoln Park submarkets.
The glut of rental units will
take some time to absorb but the
influx of new residents will inject
even more life into an already-
vibrant area, according to the
Marcus &Millichap report.
The stock of rental housing will
swell by 11,000 units this year, a
4 percent jump in total inventory
from a year ago.
Older, value-add properties are
especially sought after by inves-
tors.
One recent example is the $3
million sale of a 22-unit apart-
ment building at 1200 Colorado
Blvd.
The 13,300-square-foot build-
ing was built in 1950, according
to public records.
Greg Price and JD Lemon of
the Denver office of Marcus &
Millichap represented the buyer.
The buyer had paid $535,000 for
the property in 1995, according
to records.
Lemon found the buyer, a pri-
vate investor from Colorado.
“Twelve Hundred Colorado
Blvd. is a stable 22-unit asset
with a very healthy mix of one-
and two-bedroom units,” Lemon
said.
“The upside of the location
with everything that is taking
place at the old University of
Colorado Health Sciences Center
at Eighth Avenue and Colorado
Boulevardwas the ultimate draw
for the buyer along with the
upside potential in rents through
unit renovation,” Lemon said.
Investors see continuously
increasing rents and overall posi-
tive momentum in the local econ-
omy and are taking the oppor-
tunity to buy well-located older
assets to renovate and reposition
to command even higher rents,
according toMarcus &Millichap.
Cap rates have generally been
falling across all sectors, though
initial yields in the B and C sec-
tors have compressed significant-
ly, narrowing the spread between
those sectors and Class A prod-
uct.
Class A complexes trade with
cap rates in the 5 to low-6 percent
range while well-located Class B
and C assets hover in the low-6
percent range.
All submarkets are doing well,
though older product in subur-
ban submarkets such as Broom-
field and North Aurora have
registered the largest percentage
increases in per-unit prices in the
past year.
One important factor is a slow-
ing, but still growing, employ-
ment market.
The workforce will expand
by 27,000 workers, or 2 percent,
in 2015, easing from the 52,500
employees added in 2014.
Unemployment is hover-
ing just over 3 percent and well
below the national rate.
However, the apartment mar-
ket will be impacted by the
increase in supply.
The vacancy rate will rise by
110 basis points this year to 4.8
percent due mainly to the large
number of units being delivered
in the fourth quarter, according
to Marcus &Millichap.
However, the impact will be
short-lived.
The vacancy will fall again next
Greater Denver
Greg Price and JD Lemon of the Denver Marcus & Millichap office
recently sold this 22-unit apartment building at 1200 Colorado Blvd. for
$3 million. The sale is indicative of investor’s interest in older properties
in Denver and surrounding areas.
