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Page 8 — Multifamily Properties Quarterly — April 2015
T he multifamily market in
Northern Colorado contin-
ued its strong performance
through the end of 2014 and
into 2015, experiencing eco-
nomic growth and development.
Employment was
a driver for this
growth and the
region expanded
its workforce by
nearly 5,000 work-
ers in 2014. With
regard to popula-
tion, both Larimer
and Weld counties
were among the
top 12 fastest-
growing metro-
politan areas in
the nation from
2013 to 2014, according to figures
released by the U.S. Census Bureau.
Greeley’s metropolitan statistical
area (Weld County) came in eighth
on the list with a growth rate of 2.6
percent. Fort Collins metropolitan
statistical area (Larimer County,
including Loveland) came in 12th
with a growth rate of 2.2 percent. As
the economy and market flourish,
the influx of people is compressing
vacancies to staggeringly low aver-
age rates of 1.4 percent across the
whole Northern Colorado market.
The Northern Colorado multifam-
ily market recorded an incredibly
strong 2014, with nearly $320 mil-
lion in trades taking place through-
out the year. This number is more
than four times the amount of sales
completed in 2013 of $78 million.
Two of the three largest transac-
tions occurred in Loveland, with
the largest being the 303-unit sale
of Lake Vista Apartments at 2235
Rocky Mountain Ave. for nearly $61
million, and the third largest was
the 252-unit sale of the Greens at
Van de Water at 2900 Mountain Lion
Drive for almost $45 million. The
second-largest transaction occurred
in Fort Collins. The 460-unit Ram’s
Crossing portfolio (three proper-
ties located around Colorado State
University) sold for $58 million. The
drastic upward trend of property
values continued through 2014, as
average sales price per unit was up
to nearly $160,000 from $110,000
at year-end 2013. As seen in 2013,
demand for property is extremely
high, exemplified by historically
low vacancy rates and rising rental
rates.
Concurrently, cap rates continue
to compress, down below 7 percent
on average with many transactions
closing below 6 percent. The year
began with a similar number of
sales transactions, but a dramati-
cally different sales volume and
unit number total. This is due in
part to the sale of the 66-unit Max
Flats Apartments in Fort Collins at
$14.2 million and the sale of the
24-unit Central Town Apartments
in Fort Collins for $3.3 million. So
far in 2015, the average unit price of
nearly $162,000 has exceeded 2014’s
record of nearly $160,000.
Sales climbed as a result of the
dramatic improvement in market
conditions. Leading the way, rents
experienced double-digit year-over-
year percentage hikes. In Larimer
County, rents rose to an average of
nearly $1,200 per month per unit. In
Weld County, rental rates climbed
to nearly $870 per month per unit.
Asking rents in Northern Colorado
for multifamily units have been on
an upward trend for the last five
years and, while that trend contin-
ues, we are now
experiencing a
leveling off in rent
hikes. Although
recently there was
steady rental rate
increases across
all markets, these
increases are slow-
ing down due to
the substantial
amount of devel-
opment currently
underway and the
concern about the
future of the ener-
gy industry and its
effect on the over-
all economic mar-
ketplace.
Another driver
responsible for
record sales (and
development) is
the extremely low
vacancy rates,
which were among
the lowest in the
state and country
in 2014. These rates
remain incredibly
low across all prop-
erty ages – Fort
Collins at 1 per-
cent, Loveland at 2
percent and Gree-
ley at 0.6 percent.
In Larimer County,
properties built
between 1970 and
1979 have the low-
est vacancy rate of
0.7 percent. In Weld
County, the low-
est vacancy occurs
in properties built
between 1980 and
1989 at 0.4 percent.
The demand for
these older proper-
ties remains high,
as they provide
an alternative to
the newer, more
highly priced units
currently being
constructed or
recently delivered.
Lessees can occupy
properties in desir-
able areas without
having to pay new
product prices.
An expanding
and diversified
economy, along
with favorable
market conditions
continue to harbor
an environment
of robust invest-
ment activity and
a high level of new
development in
Northern Colorado.
According to recent
data from Apart-
ment Insights,
a database that
tracks multifam-
ily buildings, there
are currently
1,851 units under
construction, with another 3,102
planned, which are staggering num-
bers for this market. The number of
new and planned units will drasti-
cally add to the supply of inven-
tory available to potential renters,
which may alleviate some stress
on vacancy and rental rates. How-
ever, given the economic expansion
in the Northern Colorado market,
demand likely will remain very
high. The largest project (currently)
under construction is the 310-unit
Crowne at Timberline-Fort Collins
Apartments. Crowne Partners is
the developer, and the building is
expected to deliver in early 2016.
Multiple 200-plus unit projects are
also under construction across the
region.
Given the influx of people to the
region, it is anticipated that rents
will continue to increase but at a
slower rate compared with 2014.
Vacancies will loosen a little bit
with all of the current and planned
construction, but still will remain
tight and difficult for low-income
renters. As discussed when recap-
ping year-end 2014, the market has
yet to see how, and if, the energy
industry will drag on the multifam-
ily metrics.s
Northern Colorado Update
Brian Mannlein
Vice president,
DTZ, Fort Collins