CREJ

Page 2 — Multifamily Properties Quarterly — May 2022 www.crej.com Letter from the Editor W hile looming questions regarding rising inflation and interest rates, along with echoes of develop- ment headaches (supply chain, labor and regulatory issues), resonated throughout the Colorado Real Estate Journal multifamily con- ference last month, the overall tone of the market’s outlook remained fairly rosy. Overbuilding was not a major con- cern among panelists, despite the fact that the Denver metro area has over 100,000 apartments in the pipeline (under construc- tion and proposed), which represents 25% of all apart- ments ever built in the seven-county Denver metro area, according to a presentation from Apartment Appraisers & Consultants’ Cary Bruteig and Scott Rathbun. This is coupled with fairly intense rent growth. While 2020 saw rents flatten as many owners reverted to the idea of “keeping heads on beds,” as Rathbun put it, since then rents have surged. Last year, rents shot up and didn’t stop once they’d caught up to the anticipated rent growth the market had been projected to hit pre- pandemic. Instead, rents blew past those numbers. All ages of proper- ties are experiencing massive rent growth, with even 1970s product see- ing 15% year-over-year increases. So, with a massive pipeline and rents well on their way to pricing some people out of the market, why is the sky not falling? First, 2021 saw the area’s best absorption ever, according to the pre- sentation. Second, single-family homes remain unattainable for many, making apart- ments the “affordable” option, accord- ing to Bruteig. The area’s home values, on average, used to be 13% higher than the national average; they’re now 71% higher. Denver, Colorado Springs and Boulder all landed on a list of most expensive home prices in the country at 13th, 30th and seventh place, respectively. Third, proposed does not equal inevitable. Bruteig’s team examines the number of proposed projects vs. the number of actual project starts, which Bruteig dubbed the “developer success rate.” Historically, that num- ber had remained at or about 50%. In 2012, the rate started to fall, and in 2020 it hit its lowest point at 28%. There was a bump in 2021, up to 46%, but he predicts the number will rest around 30% this year. Put all three together, and it appears many are willing to bet that the demand is there and the supply will remain in check. Despite all the local, national and international headwinds blowing our way, people still think multifamily is a great asset class to be in. As one panelist put it, COVID-19 proved the necessity of multifamily – people need a place to live, and when they struggled to pay their rents, they were bailed out. Michelle Z. Askeland maskeland@crej.com 303-623-1148, Ext. 104 Strong fundamentals Contents 4 6 8 10 12 14 16 18 20 22 24 26 33-36 Denver’s urban core is seeing renewed activity Jason Hornik Despite headwinds, keep betting on Northern CO Jake Hallauer Reality check: The eviction tsunami never arrived Drew Hamrick Capital opportunities exist for workforce housing Rob Bova Build-to-rent fever picking up speed in Colorado Karen Key Managing short-term rental regulatory changes Pam Knudsen Space flexibility and connectivity reign supreme Kim Duty Management: Embrace the experience economy Heather Campbell How to match prospective residents’ expertise Elizabeth Meyers Property tech can set managers up for success Demetri Themelis Reinvent ‘normal’ in the preconstruction approach Jason Vaughn Precast offers life safety and resilience features Jim Schneider Affordable housing spotlight Apartment Appraisers & Consultants Full details of 1,400 properties surveyed quarterly since 2004 New construction pipeline, rents, vacancy, owners, managers Denver, Colorado Springs, and Fort Collins/Greeley Appraisals and Market Studies Fannie Mae, Freddie Mac, FHA/HUD Colorado Front Range Cities Since 1992 www.apartmentappraisers.com www.apartmentinsights.com