CREJ

Page 2 — Multifamily Properties Quarterly — August 2020 www.crej.com Letter from the Editor T here seems to be more opti- mism in this issue than pre- vious ones since COVID-19 made it’s abrupt entrance into our lives. However, at press time, the daily news cycle was ner- vously counting down the number of days until enhanced federal unem- ployment benefits expired. But even that is beginning to feel hopeful, as more reports surface about Congress working on a variety of packages that would extend benefits. Since we don’t have a crystal ball and it is important to keep from spiral- ing out of control based on “what if” scenarios, let’s instead focus on what we know: the second-quarter multifamily num- bers that the Apart- ment Association of Metro Denver came out with right before we went to print. For the first time in more than a decade, average rents decreased $30 per month, to $1,506. The last time rents were lower than the period 12 months earlier was the first-quarter 2010, according to AAMD. The asso- ciation reported that “nearly every age of apartment and nearly every size apartment saw declines in rental prices,” the press release said. “Newer properties showed the steepest decreases in rents, as properties built in 2010 now have average rents of $1,840, a $105 drop from last quarter. Properties built in the 1970s remain the least expensive to rent, averaging 20% less than average rental costs for all apartments.” In addition, the report focused spe- cifically on the impacts of COVID-19. For the months of April, May and June, delinquency was very low. The metro areas also added 1,170 new units with a net-positive absorption of 3,801 units in the second quarter – meaning that 3,800 more apart- ments currently are rented than were rented in March – a sign that demand for rental housing still is very strong, said Mark Williams, executive vice president of AAMD. Before the pandemic, there was a debate revolving around the num- ber of units Denver needed. Some experts would sound the alarm that we were overbuilding and a cliff was right around the corner – many oth- ers wrote how Denver had nowhere near the number of units the city would need to support projected growth expectations. COVID-19 is bound to complicate this issue even more. The pace and vitality in which building begins again will rely largely on developers and lenders. Two developer surveys, one conducted by the National Multifamily Housing Council and one from a local Colo- rado firm, share insights into what’s happening right now for many proj- ects as well as gauges developer appetite for new projects. Couple these findings with the lending mar- ket activity highlighted on Pages 8 and 10, and you’ll get a decent understanding of market sentiment at this moment. Michelle Z. Askeland maskeland@crej.com 303-623-1148, Ext. 104 Second-quarter statistics Contents 4 6 8 10 12 14 16 18 20 21 22 23 24 30-36 Developers report delays in permitting, starts Kim Duty Strong fundamentals to help us thrive post-pandemic Robert Bratley Pandemic’s effect on escrow requirements Brian Fisher and Brian Mooney COVID-19 affects multihousing pricing, underwriting Pam Koster Developer poll reveals caution, but optimism Travis Hodge Buyers need patience to capitalize on opportunities Kevin Brinkman Expiring unemployment benefits bring uncertainty Caitlin Walter The market’s proven resiliency will prevail again Andrew Monette Insurance considerations for multifamily clients Chuck McDaniel Differentiation comes in many forms for projects Erik Okland Design for a resilient world with increased livability Michele Raftery Innovative approaches to drive affordable housing Nathan Sciarra Apartment hunting in Colorado changes forever Doug Backman Affordable housing spotlight

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