Page 2 — Multifamily Properties Quarterly — February 2020 Letter from the Editor A fter proofing this issue, one topic is on my mind: rents. Denver metro rents continue a downward trend, as the fourth quarter saw rents slightly decrease from the previous quarter to $1,503, according to a Jan. 22 report from the Apartment Associ- ation of Metro Denver. While a slight fluctuation in the winter months doesn’t seem alarming – and, in fact, rents still grew $47 from the same time the previous year – the AAMD report, as well as some of the articles within this issue, point out that rent growth is flatten- ing. When the city’s 2.8% inflation rate is taken into account, real rent growth for the year was less than half of a percent. In 2018, the average rent growth was 3.2%, which was the low- est since 2011. Further, when the study examined average discounts and concessions, average effective rents decreased 1.1% from the third quarter and 2.5% from the year before. This trend isn’t confined to just Denver either. The report states that 23 out of the 37 markets covered saw rents decline. Adams County saw rents down in every submarket and Jefferson County and Boulder/Broom- field saw average rent declines in all but one submarket each. Interestingly, this decline can’t be tied directly to supply – as demand continues to outpace supply. 2019 saw fewer apartments deliver – 9,952 units – than 2018 (12,324 units) and 2017 (13,348). For this reason, vacancy continues to drop, going from 6.4% at the start of 2018 to 5.4% at the end of 2019. Of course, the report points out, average rents vary largely based on vintage. New apartments, those built since 2010, still command average rents of $1,869, while properties built in the 1970s saw rents average $1,208 in the fourth quarter. The day before the AAMD report came out, I received another account fromYardi Matrix, which reported that nationally the U.S. multifam- ily sector posted steady rent growth in 2019 – averaging 3% for the year, with 21 of the top 30 metros record- ing rent growth of at least 2.6% in December. Several of this issue’s authors dive deeper into the numbers and exam- ine what they mean. On Page 8, Jor- dan Brooks breaks down the impact of concessions and underwhelming rent growth while highlighting a few submarkets in Denver and Colorado Springs that continued to impress. On Page 10, Irina Lupa takes a broader view of our market, covering the market’s rapid growth over the past decade, and reminds us of how fast things did surge for awhile. And finally, on Page 20, Christin Daniels highlights ways for owners and man- agers to save money as rent growth flattens. Michelle Z. Askeland 303-623-1148, Ext. 104 2019’s stagnant rent growth Contents 4 6 8 10 12 14 16 18 20 22 26-34 Tertiary markets see influx of investment activity Brian Mooney, Mack Nelson and Chris White Will this year see continued apartment success? Andrew Monette Year in review: Market strengths and weaknesses Jordan Brooks Accelerated growth defines Denver’s past decade Irina Lupa Opinion: Study shows why rent control doesn’t work Terry Simone How to determine the best amenity mix for projects Bo Chapman Budgeting tips for developers and contractors Jason Vaughn Opportunities to strengthen customer service Heather Campbell Smart purchasing practices can save big money Christin Daniels Arroyo Village aims to serve 3 Denver populations D. Dontae Latson Affordable housing spotlight