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— Multifamily Properties Quarterly — May 2016
Prudential Mortgage Capital Company combines one of the
industry’s most experienced teams with extensive lending
capabilities and consistent performance in the Colorado market.
We originated nearly $6 billion* in multifamily loans in 2015
and focused on a variety of specialized property types including:
market rate housing, affordable housing, student housing, senior
housing and health care senior living. Once again, the numbers
prove it: We have the talent and resources to get your deal done.
PRUDENTIAL MORTGAGE CAPITAL COMPANY
WE GET IT.
DONE.
WE GE T I T. DONE .
Andrew Dale at 720-356-6408
or
Prudential Mortgage Capital Company’s
loan programs include:
Fannie Mae DUS
TM
loans
Freddie Mac Program Plus
®
Specialized affordable housing programs
FHA
Conduit
Prudential’s life company portfolio and
proprietary balance sheet program
© 2016. Prudential, the Rock symbol, and the Prudential logo are service marks of Prudential Financial, Inc. and its related entities. *As of 12/31/2015.
T:10.25”
T:7.25”
A
n influx of millennials
and strong job growth has
propelled apartment rent
increases in Denver to
among the highest in the
nation – but that growth may be hit-
ting a wall as a result of the heavy
development pipeline.
Denver has been among the
brightest stories in a thriving nation-
al multifamily sector. Over the last
two decades, the presence of Coors
Field and gentrification has trans-
formed ugly and (sometimes) dan-
gerous submarkets into high-rent
neighborhoods. An influx of jobs in
a mix of sectors such as health care,
technology and construction helped
produce growth in suburbs such
as Boulder, Aurora and Centennial.
Legalization of marijuana created a
new business segment and attracted
people for lifestyle reasons.
As the city’s job base and popu-
lation rose, multifamily benefited
from the demand. Between January
2011 and first-quarter 2016, rents in
the Mile High City rose 54 percent,
according to Yardi Matrix. However,
after seeing double-digit year-over-
year increases in 2014 and most of
2015, rent growth started to stall in
fourth-quarter 2015. The average
rent in Denver peaked at $1,277 in
September 2015 and fell to $1,269 as
of March. The year-over-year growth
rate dropped to 7.9 percent as of
March, which is still high but far
below the 13 percent it reached last
summer.
What happened? Simply, the heavy
supply of new luxury apartments is
outstripping demand and dragging
the entire market average down.
More than 8,300 units came on line
in Denver in 2015
and another 8,500
units are slated to
be completed in
2016. Not only does
that represent an
8 percent growth
of total stock over
a two-year period,
but also the prod-
uct mix is virtu-
ally all in the high
end of the market,
where there is less
demand.
Jay Rollins, man-
aging principal of JCR Capital, a
Denver-based firm that invests in
commercial real estate debt, noted
that there are a lot of young people
drawn to Denver for starter jobs and
easy access to marijuana, but they
don’t have the means to pay rents of
$2,500 and up charged at new prop-
erties.
“There’s a huge influx of young
people, but they’re not big income
earners so they end up in working-
class units, which have seen a big
uptick in rents,” Rollins said. “But
those individuals can’t afford the
Class A rents. I question the abil-
ity of all the Class A apartments to
lease up at those numbers.”
Our data shows a clear bifurca-
tion between high-end lifestyle
apartments and working-class, rent-
by-necessity units. Year-over-year
growth for RBN units remained a
sky-high 10.7 percent as of March,
compared to 5 percent for lifestyle.
With so many luxury units slated to
be delivered in 2016 and demand for
less expensive apartments likely to
remain high, the bifurcation in rent
growth is likely to continue for the
foreseeable future.
That’s not to say that growth is
over or even subpar. Projects such as
the $7 billion multiyear expansion
of the Colorado Science and Tech-
nology Park at Fitzsimmons and
Marriott International’s $530 million
Paul Fiorilla
Associate director
of research,
Yardi Matrix
Market Update
Graphics courtesy Yardi Matrix
