CREJ

Page 10 — Multifamily Properties Quarterly — November 2021 www.crej.com Market Update I t’s no secret that the Denver multifamily market is one of the strongest in the country. Investment firms and real estate investment trusts have been battling it out to gobble up assets, leading to an incredible $7.3 billion sales volume in the last 12 months. And Boulder’s multifamily market is equally popular. These metro markets are satu- rated with capital and feature the highest asking rent (Boulder at $1,823) and 12-month asking rent growth (Denver at 13.1%) in the state. This undoubtedly is music to investors’ ears, but it’s most cer- tainly not to most renters. Affordable housing is a big prob- lem in Colorado metro areas. As rents continue to skyrocket, a large part of the population is being priced out, forcing renters to seek new, more economical rental mar- kets. And it seems their answer has been smaller cities in Northern Col- orado submarkets along Interstate 25 where they can have the accessi- bility to larger metro areas without breaking the bank. n Proximity without the price tag. Affordability has become a major draw for renters seeking out North- ern I-25 corridor submarkets. Here the average asking rent is a 25% to 30% discount from rents in the Den- ver and Boulder metro areas and a nearly 15% discount relative to the national average. Boulder is particularly expensive, almost 8% higher than Denver and about 18.5% above the national average. Over the past decade, rent- al rates in the mar- ket have increased over 35%. n Developments shift to submar- kets. Even before developers started following cost- savvy renters, the Northern I-25 cor- ridor has a long- held reputation of being red-hot. Just hop in your car and make the drive from Denver to Fort Collins – it’s hard to miss the amount of development and activ- ity happening across all commercial real estate sectors. Why the corridor is the fastest- growing area in the state is easy to understand. Cheaper land and less competition have spurred a broader development shift to smaller submarkets outside of Den- ver and Boulder. Developments in these submarkets are far cheaper than most new developments in the metro areas and have slowly been capturing increasing spillover demand. In recent years, due to heavy regulations on building in the city of Boulder, developers have been targeting the growing Long- mont submarket, which is easily within commuting distance to cen- tral Boulder. Just southeast, roughly 30 min- utes by car from Boulder and downtown Denver, is south Weld County, which features two of the fastest-growing cities in the state: Erie and Firestone. Over the past six years, these cities saw a cumulative population growth of over 22%. This submarket also perfectly illustrates the corridor’s dramatic growth, with south Weld County’s apartment inventory growing from less than 150 units in first-quarter 2016 to over 1,500 units in this year’s sec- ond quarter. To do the math, that’s a whopping 900% increase. n Delivering a strong performance. Proving south Weld County can pass a supply test, apartment com- munities have been leasing up at a high-speed pace. In 2019, 240- unit Sandstone Vistas Apartments reached 90% occupancy within seven months of construction completion. That’s about 25 units per month, which is almost never seen in smaller markets outside of Denver. In early 2021, the 221-unit Apart- ment at Maddie reached over 75% occupancy within 11 months of delivery. That’s roughly 20 units per month – in the middle of a world- wide pandemic. Keep in mind the statewide stay-at-home order was issue in March 2020, and the build- ing was only 10% occupied. Also worth noting is that this strong leasing activity was realized with- out the aid of hefty concessions. n Less risk, more reward. Unlike other smaller Colorado multifam- ily markets, Northern I-25 corridor submarkets are mostly shielded from the negative impacts of oil and gas boom-and-bust cycles. Benefit- ing from proximity to Boulder and Denver, corridor submarkets have reduced exposure to energy market volatility since economies in these two metros are far less dependent on oil and gas activity. More and more investors are pay- ing attention to the speedy absorp- tion and high occupancy upsides of Northern I-25 corridor submarkets. Thus far, the success of submarket developments and positive demo- graphic trends indicate the prospect of higher-level returns. s mike.elliott@erescompanies.com Northern I-25 corridor submarkets come into focus Mike Elliott CEO and managing broker, ERES Cos. Why the corridor is the fastest-growing area in the state is easy to understand. Cheaper land and less competition have spurred a broader development shift to smaller submarkets outside of Denver and Boulder.