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Page 4 — Multifamily Properties Quarterly — February 2017
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Market Update
The multifamily market in Colo-
rado Springs finished strong in
2016, with total apartment sales
over $550 million. With 2015’s
total sales volume of $453 mil-
lion and 2014’s $485 million, the total
apartment sales volume for the last
three years is approximately $1.5 bil-
lion – more than the preceding 10
years combined, proving the contin-
ued strength of the market.
Colorado Springs recorded four
transactions over $50 million last
year. Before 2016, Colorado Springs
had just one apartment sale greater
than $50 million. Transactions blew
past the long-held $200,000-per-unit
barrier, with increased activity in that
range anticipated in 2017. A notable
transaction, Grand River Canyon, sold
in December for the highest total sale
price in Colorado Springs history.
The continued success of the mul-
tifamily market in El Paso County is
due, in part, to the unmatched positive
market fundamentals. With 4.3 per-
cent vacancy, 8.4 percent effective rent
growth, low unemployment, strong job
growth and a minimal apartment con-
struction pipeline, Colorado Springs is
looking better than ever for residents
and investors alike. Rent growth in
Colorado Springs is among the top five
in the nation and is predicted to con-
tinue strong in 2017.
Even with all of the sizable growth,
the gap between market rent in metro
Denver and Colorado Springs has
never been wider. The fourth-quarter
average market rent in metro Denver
was $1.55 per square foot, and Colo-
rado Springs recorded an average mar-
ket rent of $1.17 per sf. This 38-cent
gap is three times the historical aver-
age from 1996 to
2013. Thus, many
renters in Denver
could see an oppor-
tunity to save $250
to $500 per month
by moving to Colo-
rado Springs. To put
this in perspective,
the average market
rent in the Denver
area is the same
as the highest-end,
Class A communi-
ties in Colorado
Springs. In 2017, investors can expect
continued rent growth in Colorado
Springs that will bring this gap back to
the historical average.
While some residents choose to
commute to Denver for work, many
others will look for quality employ-
ment in Colorado Springs. Several
industry segments are experiencing
growth in the area, particularly health
and social services, accommodations
and food, education and professional/
technical services. Several new busi-
nesses have moved into or expanded
their operations in the city, contribut-
ing to the healthy expansion of the
Colorado Springs’ economy. Examples
include Sierra Nevada Corp., Raytheon,
Progressive Insurance and root9B.
With unemployment at 3.5 per-
cent in October, well below the
national average of 4.7 percent, and
approximately 7,776 new jobs created
between second-quarter 2015 and
second-quarter 2016, the outlook for
employment is very positive.
“We look forward to another great
year in 2017, with expected growth in
the medical and cyber sectors as high-
lights,” said
Bob Cope, City
of Colorado
Springs Eco-
nomic Devel-
opment direc-
tor, in a recent
report.
With over
$1 billion pro-
posed and
under con-
struction in the
health care and
medical indus-
try in El Paso County, health care has
become one of the fastest-growing
industries in the region, currently
employing approximately 11,000 peo-
ple.
The area is home to two major
hospital systems: Centura Health’s
Penrose-St. Francis Health Services
and the University of Colorado Health
System. In November, Children’s Hos-
pital/Memorial Hospital North broke
ground on a more than $150 million
expansion, expected to be completed
in 2018. Similarly, Penrose-St. Fran-
cis and UCHealth Memorial Hospital
embarked on facility expansions
throughout the region.
Currently ranked the fifth-best place
to live in the nation by the U.S News
&World Report, Colorado Springs has
the infrastructure in place to become
a regional force in the near future. One
of the most provocative and innova-
tive opportunities in the city is within
the rapidly growing field of cyberse-
curity. As per The Gazette, Colorado
Springs is home to more than 100
cybersecurity companies, nonprofit
organizations, military contractors
and units specializing in cybersecurity,
including the National Cybersecurity
Center, which began operating in
November.
Further, Tatiana Bailey, director of
the University of Colorado at Colo-
rado Springs Economic Forum, points
out the industry had more than
450 unfilled cybersecurity openings
in November, with annual salaries
between $60,000 and $85,000. The
cybersecurity industry is expected
to have up to 1.5 million vacant jobs,
nationally, within two years.
Given all of these recent develop-
ments, Colorado Springs should
benefit from only accelerated growth
in 2017 and beyond. An ever-diverse
economy is in expansion mode, with
increasing populations, household
incomes and home values, coupled
with an expanding job market with
significant developments in health
care and medical services, high-tech
industries and the service sector. An
influx of residents will create greater
demand in multihousing and pro-
vide an attractive alternative for both
investors and renters to Colorado’s
capital city. s
Saul Levy,
Director, ARA
Newmark, Denver ARA Newmark
$-
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Colorado Springs Historical Sales Volume
Source: CS Owners List