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W ith 10,200 apartment units either under construction or in planning in downtown Denver (according to Apart- ment Insights’ third-quarter data), many are speculating that the market is overbuilt.Ten thousand is a big number – enough to increase downtown Denver’s current apartment stock by up to 49 percent – so it’s easy to be skeptical. However, if you dig into the num- bers and look at a common economic measure of the balance between apartment supply and demand, what you find may surprise you. In fact, our analysis revealed that downtown Denver is underserved and additional supply is needed. The metric com- monly used to mea- sure the balance between apartment supply and demand is the jobs to apart- ment units ratio. In other words, the number of new jobs needed to absorb one additional apart- ment unit.The rea- soning behind this methodology is simple – the primary driver of apartment demand in the U.S. is job creation. In general, a city’s downtown urban core has a lower jobs to apartment units ratio than its respective metro area.This is because density is asso- ciated with lower homeownership rates and smaller household sizes. If you look at Seattle as an example, the downtown ratio has remained between four and 4.5 jobs per apartment for the past 15 years, while Seattle’s metrowide ratio has hovered around 5.5 jobs per apartment over the same period. Seat- tle’s consistency over 15 years shows that developers in that market have done an excellent job of keeping pace with demand, supporting healthy and stable multifamily asset performance. Denver’s story looks much different. In 2000, Denver’s downtown ratio was a whopping 21.3 jobs per unit, more than four times greater than downtown Seattle.This is simply too high and equates to a residential market that has underserved Denver’s downtown employment base. The good news is new supply has steadily pushed downtown Denver’s ratio lower over recent years. By the end of 2017, we reached 6.6 jobs per apartment unit. Although a significant improvement, as discussed earlier, urban cores tend to have lower ratios, and at 6.6 our downtown is still well- above metro Denver’s ratio of 5.9 jobs per apartment unit. Please see Page 27 Dispelling the myth: Downtown is not overbuilt INSIDE Multifamily updates for the state, Denver, Colo- rado Springs and Northern Colorado Market updates This issue highlights projects successfully bringing affordability to Colorado residents Affordable housing PAGES 29-42 A new residential property in Uptown features 300- to 400-square-foot micro-apartments Tiny living in Denver PAGE 26 November 2018 Matt Vance Economist and director of research and analysis, CBRE PAGES 4-12 A metric commonly used to measure the balance between apartment supply and demand is the jobs to apartment units ratio. In other words, the number of new jobs needed to absorb one additional apartment unit. When examining the market this way, downtown Denver is underserved.