Page 2 — Multifamily Properties Quarterly — February 2018 Letter from the Editor T his issue features a variety of articles offering predic- tions for the year ahead, with most building off the successes of 2017. Last year, the Denver multifamily market fin- ished another record year with 40 closings in the fourth quarter alone, according to an article written by HFF’s Anna Stevens on Page 4. 2017 started slowly, with only 19 sales in the first quarter, but activity grew each quarter. This year, expecta- tions are flipped, at least according to one source I inter- viewed for this issue’s cover story. “Compared to 2017, where we had a slow first half of the year, 2018 will start strong,” said CBRE's Matt Barnett. “The expecta- tions of rising interest rates have motivated both buyers and sellers. I think we’re going to see, most like- ly, more transactions the first half of the year than potentially in the second half.” One thing is clear to me after working on this issue – the momen- tum of the multifamily market con- tinues to attract many and, thanks to the Tax Cuts and Jobs Act, the interest in real estate investment is anticipated to increase as high-net- worth individuals shift capital from equities to real estate investments, Pinnacle Real Estate Advisor’s Jeff Johnson and Andrew Monette pre- dict on Page 10. Meanwhile, concessions around the metro area are forecast to increase this year, an article by CoStar’s David Pierce states on Page 8. “In January, 27 percent of all rents were tied to a rent concession, up from a peak of 23 percent during the prior winter leasing season,” the article states. This uptick in conces- sions coincides with a supply wave that’s just beginning to deliver, and will continue to do so in 2018 and 2019. While rent increases cooled in 2016 and 2017 to 2 percent, follow- ing a four-year stretch of nearly 6 percent increases every year, as Pierce’s article states, it’s still dif- ficult to talk about the multifamily market without acknowledging the affordability gap. For that reason, in this issue, we’re kicking off the Affordable Housing Spotlight, which will run at the end of every Multifamily Properties Quarterly. Rodger Hara, an affordable housing development consultant and well-known mem- ber of our community, is curating the authors and article topics for the spotlight, as well as writing articles himself. It’s an important topic, and we’re excited to dedicate space to the many discussions sur- rounding it. After looking over this section, please share your thoughts and opinions on the spotlight’s cov- erage with us. Michelle Z. Askeland 303-623-1148, Ext. 104 Expectations for 2018 Contents 4 6 8 10 12 14 16 18 20 22 24 26 28 32 33 33 34 35 35 Robust activity supports positive 2018 outlook Anna Stevens Expect construction costs to continue to rise Travis Hodge and Craig Kalman Tracking Denver's apartment concessions activity David Pierce Real estate investors will benefit from new tax law Jeff Johnson and Andrew Monette Nonrecourse loan options for smaller properties Brian Fisher Lending fundamentals continue to remain reliable Timothy Weldon Why we’re investing in smart technologies Elie Rieder Property acquisition: Get a third-party review Paul N. McCarter Condo development outlook to improve in 2018 Dave Lee Rethink the residential mindset of the middle class Pete Dikeou Are boom times leaving quality design behind? Michael Leccese Multidiscipline approach keeps projects on track Keith E. Moore and Mark Weidhass A look inside competitive apartment brokerage Adam Riddle MPQ to feature new Affordable Housing Spotlight Rodger Hara Teacher housing is a struggle for many districts Paula Davis CO community tackles teacher housing challenges Rodger Hara Recognizing the changed role of housing authorities Kim Iwanski and Rodger Hara DHA partnership: The Boulevard One Residences Douglas Snyder Book review: ‘ The Well-Tempered City ’ by Rose Melissa McGinley