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Page 16 — Multifamily Properties Quarterly — November 2017
Multifamily property management that puts
your building on a more profitable track.
Like the railroad platform that spins train cars in a new direction,
Wheelhouse Apartments™ repositions your property for increased
cash flow and building value.
Property Management
Leasing & Maintenance
Accounting
Construction Management
Asset Management
Marketing & Branding
Strategic Planning
Wheelhouse Apartments is central Denver’s premier apartment property
management company, helping apartment owners maximize income and
property values through expert property management, innovative marketing
and branding, cost-effective renovations and asset management.
UNIQUE
PROPERTIES
Unique Apartment Group
COLORADO’S PREMIER APARTMENT BROKERS
In partnership with: Call us for a free initial
consultation: 303.518.7406
Part of the Wheelhouse family of companies: Boutique Apartments • Wheelhouse Apartments • Wheelhouse Commercial Management • Wheelhouse Construction
Wheelhouse Apartments • 574 Santa Fe Drive, #110 • Denver, Colorado 80204 •
Denver Highlight
T wo years ago, the Denver
apartment market was one
of the nation’s strongest.
The market was fuller than
it had been in 15 years, and
rents were growing at a dizzying
pace. A lot of that momentum traced
back to phenomenal growth in the
metro’s young, talent-rich labor
force. Today, educated millennials
will move toward the metro for well-
paid employment opportunities and
a quality of life rivaled by few other
places in the country. While Denver
is still a hot spot for relocations, the
apartment market has cooled off
significantly.
If the market’s fundamentals
remain strong, then why isn’t the
Denver apartment market perform-
ing at the same level as in 2015?
Simply put, developers are bringing
new apartments to the market faster
than renters can fill them.
Developers delivered 5,835 new
apartment units to the metro dur-
ing the first three quarters of 2017,
according to our pipeline figures.
Some 4,990 more are identified for
completion in the fourth quarter,
bringing the year-end total to 10,825
new units – the most this cycle.
Some 9,720 units have been identi-
fied for delivery for all of 2018. That’s
a total of 20,545 new units in two
years.
At the same time, annual job
growth levels in Denver have
declined from 3.5 percent in Sep-
tember 2015 to 1.4 percent in Sep-
tember 2017. That’s an average pace
in the national picture, but a slow-
down is expected in a market where
unemployment is very low. Even
with the slow-
down, apartment
demand remains
high because of a
variety of factors,
including:
• Denver is a
growing tech hub
with a vibrant
arts culture that is
attracting highly
educated millenni-
als to the area.
• Population of
the prime renter
group (ages 20-34)
has increased by
13.3 percent from 2010-2015, accord-
ing to Census Bureau statistics. This
rise has been buoyed by the reloca-
tion of several companies, particu-
larly in the financial services sector,
from higher-cost California locations
to Denver.
• Single-family inventory is tight,
especially in the $100,000-$300,000
price range, which keeps more peo-
ple in apartments.
No matter how strong the apart-
ment demand is, it still is not
enough to keep up with supply,
which is why rent growth has
remained comparatively low com-
pared to earlier in this cycle. The
Denver average effective rent has
increased $91 since the beginning
of this year to $1,451 in September,
according to our data. Annual effec-
tive rent growth was 3.1 percent,
compared to the cycle low of 1.5
percent last September. Still, that’s
down more than 7 percentage points
since mid-2015.
A large percentage of these new
units are amenity-rich, Class A spac-
es that are marketed to higher-end
renters. And although luxury apart-
ment rent growth spiked in Septem-
ber, it remained the lowest of the
three primary classes in September.
Meanwhile, as rents are rising from
the cyclical low, concessions fell at
existing properties, but increased in
new properties, which are not includ-
ed in the rent-growth calculation.
Existing properties that cut an average
of 0.7 percent off asking rent for con-
cessions in January were only taking
off 0.3 percent in September, signifying
property owners’ confidence in filling
their properties.
Concessions offered in lease-up
properties, however, have increased
this year, from 5.1 percent off asking
rent in January to 5.9 percent off in
September. This increase shows how
owners of new properties are realizing
the competition they face for resi-
dents, especially when effective rent
growth for these newer properties was
-0.7 percent in September.
Digging down into Denver submar-
kets, the urban core, in this instance
the downtown submarket, is taking
the lion’s share of new supply. Some
3,141 new units have been identified
for delivery in the next two quarters,
34.8 percent of the metro total, on
top of the 2,128 units completed in
the first three quarters of 2017. Given
those supply figures, it’s no surprise
that downtown Denver has the low-
est annual effective rent growth in the
metro, -2.7 percent in September.
Jay Denton
Senior vice
president,
Axiometrics, a
RealPage Co.,
Richardson, Texas