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Page 8 — Multifamily Properties Quarterly — August 2017
I nvestor demand is at an all-
time high in the multifamily
markets of Colorado Springs
and Aurora, due to the strong
growth over the past 18
months and predicted growth in the
next 12 months. Buyers are riding a
market wave, as continued aggres-
sive rent growth is projected into
2018. Local, regional and numerous
national buyers new to both mar-
kets continue to compete for assets,
raising the bar to levels never seen
before. Strong economic drivers
in both markets continue to push
rents, sales and construction; addi-
tionally, investors are capitalizing
on value-add opportunities, reno-
vating older properties and subse-
quently increasing rents.
Aurora has an approximate popu-
lation of 362,000, compared to an
estimated 465,000 in Colorado
Springs. There are about 32,000
existing units in Aurora with an
additional 1,000 under construction.
In contrast, Colorado Springs has
48,000 existing units and another
2,000 under construction.
Colorado Springs had its best
year for multifamily investment
sales in 2016. Annual sales vol-
ume increased 14 percent over
2015, growing from $447.7 million
to $510.4 million, and the aver-
age price per unit grew 12.3 per-
cent. Economic growth in Colorado
Springs is attributed to the vast
number of aerospace, cybersecurity,
IT and medical innovation compa-
nies that call the region home, as
well as more than 30 Fortune 500
firms and five military installations.
Meanwhile,
with the devel-
opments of the
Fitzsimons Innova-
tion Campus, the
$1.8 billion Den-
ver International
Airport build-out
plan underway,
and light-rail
expansion spur-
ring strong rental
growth along
Interstate 225,
Aurora now has
solid economic
and transportation
drivers that should bode well for
years to come. While both markets
are experiencing strong economic
growth, Aurora is seeing higher ‘per
pound’ pricing and slightly higher
average rent levels. Aurora aver-
aged $441 million in sales volume
between 2015 and 2016.
In direct correlation to robust
sales numbers, both markets have
experienced robust rent increases
through the first quarter. Aurora
saw a 12-month increase of 11.4
percent, while rent in Colorado
Springs grew 10.3 percent for the
same period. The year-over-year
rent growth of 10.3 percent in Colo-
rado Springs is ranked second-high-
est nationally behind Reno, Nevada,
for secondary markets.
Both markets should continue to
see paced new construction – in
comparison to central Denver and
the 36 Corridor, for example – as
rising costs versus current market
rents are keeping deliveries moder-
ated. Only select sections in both
markets are viable for new con-
struction.
In addition, both markets contin-
ue to see single-family home prices
climb, pushing upward pressure on
rents. The median home price in
metro Denver has risen 88 percent
since 2011, creating high barriers to
homeownership, particularly among
millennials. This, coupled with
high in-migration, has kept general
vacancy low and demand for rent-
als high in submarkets like Aurora,
where rental units are priced below
a mortgage payment for an entry-
level home. Further both markets
are experiencing some of the lowest
vacancy rates in the state, hovering
in the 3 percent range.
Value-add investment strategies
have been the norm in both areas.
There are countless examples of
buyers purchasing older buildings
Celebrating 30 years of building relationships
and enhancing the value of real estate.
Property Management · Owner Representation · Development · Brokerage · Construction Management
303.796.2000
3OYEARS
Market Update
Greg Price
Senior director,
national
multihousing
group, Marcus &
Millichap, Denver
Unlike stock in many other Front Range markets, value-add opportunities still are abundant
throughout Aurora and Colorado Springs, shown above.