CREJ

Page 6 — Multifamily Properties Quarterly — February 2022 www.crej.com Market Update Contact: Jennifer Nessett | jnessett@sares-regis.com | 949-223-7628 Third Party Property Management Service Provider We have the creativity and vision to capitalize on opportunities that others miss or can’t solve. The SRG Residential team is available for property evaluations A t the national level, 2021 was a historic year for the multifamily industry. Despite a host of challenges on the construction and develop- ment front, the new construction pipeline remained very active. Even in the face of those new units, record apartment demand sent average occupancy higher, average effective rent soaring and lease concession availability into full retreat. Colorado multifamily reflected these national developments in some ways, but not across the board. With 2021 now in the books, it is time for one final look before turning the page to 2022. We track the Denver and Colorado Springs markets, covering a region from Pueblo in the south up through Fort Collins in the north, with Boul- der, Denver and Colorado Springs in between. It is this region that will be the main focus of analysis. All numbers below refer to conventional properties with at least 50 units. n New supply and apartment demand. About 9,600 new units were delivered across these markets in 2021, a small decrease from the 2020 total but right in line with the vol- ume from 2019. The vast majority of deliveries were located in the Denver, Aurora and Lakewood metropolitan statistical area, but close to 500 new units each were added in the Greeley and Boulder metropolitan statisti- cal areas as well. Colorado Springs, despite having the second-largest multifamily presence in the region, added far fewer new units during the year. Three Denver submarkets – Auro- ra, Broomfield/ Lafayette, and Five Points/central business district/ Capitol Hill – each added at least 1,000 new units, led by the approximately 1,700 new units in Aurora. In all, 18 of 25 submarkets we track saw some level of new supply in 2021. While new supply slowed a little compared to the previ- ous year, net absorption picked up from 2020. In fact, with the exception of 2019, apartment demand in 2021 was higher than any year in the last five. However, national 2021 absorp- tion was more than 2019 and 2020 combined. Relative to the nation, and a host of markets that mirrored that demand explosion, the uptick for the Denver and Colorado Springs mar- kets lagged somewhat. The Denver MSA fueled the annual demand increase with net absorption of nearly 11,000 units, following just less than 8,000 net units absorbed in 2020. More than one-quarter of those 11,000 units were in the Five Points/ CBD/Capitol Hill submarket. But in the Colorado Springs MSA, apart- ment demand fell from almost 1,900 net absorbed units in 2020 to just 700 net units in 2021. In Fort Collins, net absorption in 2021 was about 100 units fewer than in 2020. For the market as a whole, a decrease in new supply and an increase in apartment demand led to an average occupancy gain of nearly 2% to close December at just over 93%. n Average effective rent and lease concessions. Though the increase in demand was not quite to the level seen at the national level, rent growth was dramatic. Average effec- tive rent climbed 16% in 2021. For some context, the previous high- water mark over the last five years was a 6% gain in 2017. With an 18% annual gain, the Fort Collins area led the way for the region. The Boulder and Denver metro areas were right behind with annual appreciation of 17% and 16%, respectively. Notably, all four price classes gained at least 10% in average effec- tive rent. Class A and Class B led the way by adding 18% each at the aver- age. The 12% increase for the Class D subset was the smallest – though that term is especially relative when discussing 2021 rent growth. A big part of the rent growth story was the retreat of lease concession availability. An annual decline of more than 60% in the share of con- ventional properties offering a dis- count resulted in only 12% of prop- erties offering concessions for new leases at the end of December. That rate of availability was lower than at the end of any year of the last five, though not too far from the roughly 13% of properties offering a discount at the end of 2018. n Takeaways. 2021 was a year for the history books for the multifamily industry nationally. Record demand fueled rent growth not seen in at least a generation, while the new construction pipeline churned out nearly 350,000 new units. Colorado, and specifically the Denver and Colo- rado Springs areas, certainly was not left out of the party. A final look at a storybook year for Colorado apts. Jordan Brooks Senior market analyst, ALN Apartment Data Please see Brooks, Page 30