CREJ

Page 4 — Multifamily Properties Quarterly — May 2022 www.crej.com Market Update N A T I O N A L A W A R D W I N N I N G P R O P E R T Y M A N A G E M E N T W I T H U N P A R A L L E L E D K N O W L E D G E O F L O C A L C O L O R A D O M A R K E T S 720.236. 1400 NewBusiness@AssetLiving.com T he Denver metro area sec- ond-quarter multifamily report shows rising incomes are boosting apartment per- formance amid demand for a shift back into the urban core. n Growing tech scene a boon for rental demand. Denver’s tech sector is swelling, propelling the market’s median household income above any metro area outside of the Bay Area and the nation’s capital. Additionally, the metro area’s aver- age age lands 1.6 years below the national average, which is a posi- tive for rental demand as the 20- to 34-year-old cohort is more likely to rent. Growth in the tech sector has aided local employment, as Den- ver’s worker tally will eclipse the pre-COVID-19 measure by roughly 50,000 roles by the end of this year. During the last 12 months, the formation of 21,500 new households in the metro area also has supported a sizable contrac- tion in multifam- ily vacancy in the area. Availability retreated to 3% in the first quarter, helping lift the average effective rent to a prelimi- nary estimate of $1,796 per month. Net absorption surged past 16,000 units, despite builders completing just 9,000 units in the annual term. n Development has been consistent in Denver. Between 7,000 and 11,000 apartment units have come on line in each of the last six years. Down- town has added the most new units during the past year. These offer- ings were well received by renters. Downtown as well as the nearby Five Points-Capitol Hill-Cherry Creek and Northeast Denver areas recorded the strongest net absorp- tion figures in recent months. In line with previous annual construc- tion figures, most of the 10,200 units set for completion this year will arrive downtown, as areas near River North and Five Points become more desirable to renters and, thus, builders. The strategic location of these projects suggests the arriving units will be in high demand again this year. The anticipated continu- ation of strong leasing likely will result in overall vacancy retreating 30 basis points year over year to 2.9% by the end of 2022. n Up-trend in CBD demand not impacting suburban success. The metro area’s central districts have recorded the strongest drops in vacancy of late – a reversal of the early pandemic trends. Downtown and adjacent submarkets recorded vacancy retreats of at least 270 basis points last year as renters eagerly returned to trendy and rapidly rejuvenating communi- ties. Effective rents in the central business district have surpassed 2019 levels by almost 10%, driven by robust demand in urban locales upon loosening COVID-19 restric- tions on leisure activities. Notably, improving fundamentals in the CBD have not affected performance in the suburbs. Areas like Broomfield, Littleton and Glendale continue to note vacancy compression. Only one submarket, Southeast Aurora- East Arapahoe County, has a vacan- cy rate above 4%. n Class A rates driving up rental cost across the spectrum. A young and growing populace with high incomes is translating to low avail- ability of luxury apartments, allow- ing for strong rent growth within the tranche. Meanwhile, rates for units toward the lower end of the class spectrum are also on an upward trajectory, as they adjust to market conditions. Rents are grow- ing the fastest in the Class A tier, but all three segments had gains Denver’s urban core is seeing renewed activity Jason Hornik First vice president investments, Price Apartment Group, Marcus & Millichap Please see Hornik, Page 28