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Page 10 — Multifamily Properties Quarterly — November 2017
Market Update
MULTIFAMILY CONSTRUCTION DELIVERED BY
COMPLEX REQUIREMENTS EXPERTS SO YOU
CAN FOCUS ON BUILDING YOUR BUSINESS.
X at Sloan’s, Denver
M ultifamily commercial real
estate has been a sweet
spot in Northern Colorado,
benefitting from the attrac-
tive housing prices of the
last few years. Last year, Northern
Colorado experienced record sales
volumes that netted $644 million on
about 60 transactions – nearly three
times the region’s previous high.
Through the first three quarters of
last year, nine properties of more
than 100 units traded hands, totaling
$360 million in sales volume. During
the comparable span this year, four
properties have sold, representing
$167 million in sales – less than half
the amount transacted in 2016. We
now have the last quarter of 2017 to
meet the typical regional level of six
annual transactions involving 100
units or more.
Our region continues to attract
large investors from around the
country who recognize the value of
Northern Colorado’s stable employ-
ment market, strong post-recession
performance and appealing invento-
ry levels. All of this is buoyed by the
growing interest of people wanting
to live in this region to attend school,
work and retire.
That said, last year was an anom-
aly. The inventory in the Northern
Colorado market is not large enough
to accommodate that sheer number
of transactions year in and year out.
In 2017, the acceleration in rent and
property value growth we saw in
2016 started to stabilize.
Although overall sales have nor-
malized, opportunities continue
to exist. We are seeing increased
inventory in the market, including
from older proper-
ties that haven’t
changed hands
for many years as
owners decide to
cash out while pric-
es are so attractive.
Multifam-
ily investment
remains desirable
for several rea-
sons. The ability to
hedge risk by hav-
ing many tenants
in smaller priced
investments is appealing to inves-
tors – if owners lose a tenant, there’s
generally somebody out there trying
to find a place to live. On the other
hand, if an office tenant leaves, it
does not necessarily mean that there
is another company searching for a
place to put its employees.
Most of the investment in the
region is from local and regional
investors who fully understand the
region’s dynamics and can be near
their investments. However, we have
seen an increase of institutional
investors from around the country
who are realizing the strength and
desirability of Northern Colorado.
And the institutional investors are
very satisfied with their positions in
this market.
One significant indicator is the
substantial number of national
developers with multifamily con-
struction projects either out of the
ground or in the pipeline, which
conversely is a reason for the slow-
down in rent and value growth
along with increased vacancy, all
contributing to some apprehension
in the marketplace.
The current construction
pipeline of the Northern
Colorado market, which
includes Larimer and
Weld counties, has 6,000
units under construction
or planned, significantly
above the typical-year
numbers of 500 to 1,000
units. This considerable
number of properties
being added to our mar-
ket include approximately
4,000 market-rate units,
1,200 student-housing
units, and another 1,000
units of affordable and
senior housing.
The aggressive construc-
tion over the last few
years has been decently
absorbed. But in the last
quarter we saw absorp-
tion soften. Incentives are
edging their way back into
the market, and vacancy is
starting to climb with these
new units coming on line.
Immigration into the
region remains strong,
between 2 and 3 percent
per year. There appears
to still be strong demand
from students, companies
and retirees choosing to
locate here. Just as robust
are the numbers of people
relocating here for good
jobs and quality of life, particularly
from the Midwest, Texas and Califor-
nia.
We are at that interesting moment
in the market when we will see if the
intense activity will pay off for inves-
tors who were enticed by our low
vacancy rates and steady demand.
Will the sheer number of units
being added match the population
influx? ▲
Brian Mannlein
Director, Cushman
& Wakefield, Fort
Collins
Cushman & Wakefield
Multifamily activity in Northern Colorado normalizes after
a record year in 2016.