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— Multifamily Properties Quarterly — August 2016
C
olorado is quickly becoming
one of the most desirable plac-
es to live in the nation with an
unrivaled booming economy,
a blend of outdoor adventure
and high cultural city aesthetic. Our
state is growing by leaps and bounds,
from the city to the suburbs to moun-
tain towns.We can see and feel the
dramatic population surge. For those
of us who live here, we know why
and, because of this, the constant
question for most developers has
become – how do we keep up?
Everybody within the multifamily
sector knows the stats from the State
Demographer’s Office. Colorado had
the second-fastest state population
growth as a percentage for 2015 with
the probability of overtaking North
Dakota in 2016. Colorado’s population
growth for 2015 reached 101,000 with
the expectation of another increase of
100,000-plus in 2016.
This growth was coupled with a
multifamily construction sector run-
ning at peak rates, placing 9,000 to
11,000 units in 2015. As construction
experts, we familiarize ourselves
with the realities – land costs are
continuing to rise, construction costs
are increasing slightly, interest rates
remain steady, vacancy rates are sta-
bilized at 5 percent and rent growth
maintains steady at 6 percent. This
telling evidence suggests that some
scheduled projects will not move for-
ward and new inventory will stabilize
between 8,000 to 10,000 units.
Items for uncertainty on the horizon
are Colorado’s construction defect leg-
islation, impacts of the loss of primary
jobs within the oil and gas sectors,
especially at it relates to northern
Colorado, and changes in the politi-
cal climate with
an upcoming gen-
eral election.With
guarded optimism,
multifamily devel-
opers and builders,
both regional and
evermore national,
continue to focus on
Colorado as a strong
and continually
growing market.
The construction
market boasts an
estimated 9,000
multifamily units
in development.We’re confident that
in our growth there is something for
everyone.
n
Downtown Denver and the great
infill.
Millennials continue to flock to
Denver.With their immediate desire
for an urban setting coupled with the
city’s increasing focus on public tran-
sit, Denver is one of the nation’s lead-
ing cities in apartment growth.
Because of this increasing growth,
urban property is fetching an all-time
high on the market. To bring down the
land-cost basis associated with pur-
chase prices and less-than-desirable
remaining sites, projects are getting
bigger and taller and units are getting
smaller.Welcome to populous city liv-
ing.
Several new construction meth-
ods now are allowed by code and
are pushing wood-framed buildings
to five stories of Type 3 residential
framing over two or three levels of
Type 1 concrete podiums. In addi-
tion, engineered metal stud is making
resurgence and pushing the limits of
eight- to 10-story residential framing
over concrete podiums.
In 2014, more-than-100-unit projects
consistent of four levels wood frame
over a podium were the norm. Midrise
projects now are consistently averag-
ing above 175 units and are becom-
ing the standard for 2017. This new
project makeup costs more per unit
and the expertise involved requires
horsepower that only a select group
of developers and multifamily general
contractors can provide. Along with
growth comes new opportunities for
the most-educated and efficient build-
ers to tackle city building with surefire
expertise and talent.
n
The northern territories.
You can
still walk up to your new apartment
door without taking the elevator in
Loveland, Broomfield, Longmont and
Greeley. These northern cities and cor-
responding suburbs on or above the
470 beltway are friendly and welcom-
ing of new development.
With a cost of living scaled to the
family and access to jobs in Denver,
Boulder or Fort Collins, north of Den-
ver continues to grow at a rapid rate.
Expertise and long-standing relation-
ships with the local authorities for
developing and permitting remains
critical in efficiently moving through
the development process. In addition,
those general contractors self-per-
forming concrete and framing have
added an advantage to keep costs
down and maintain schedules.
Despite the continued charm, Fort
Collins in no longer the small town
it was when it was rated as a top 10
place to live between 2006 and 2012.
The Fort Collins metro area led the
majority of Colorado and the U.S. in
population growth last year, according
to data from the U.S. Census Bureau.
Fort Collins is seeing density levels
equal to that of big-city Denver just 10
years ago.
n
Housing crisis in the mountains.
Colorado’s beautiful mountain towns
are no longer the quaint, small-scale
destinations for solitude. Read any ski
town gazette and it’s apparent that at
the forefront of the community is the
demand for worker housing and ris-
ing rents.With companies like AirBnB
and VRBO, short-term rentals have
decimated an already-underserved
housing need in the ski country.
J. Adam Killian
Principal, Shaw
Construction,
Denver
Market Update
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.
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Shaw Construction
