CREJ - Multifamily Properties Quarterly - October 2015
This September I attended the 2015 Apartment Bus Tour presented by Apartment Appraisers & Consultants and CREJ. It was a great opportunity to learn what owners and developers are pursuing in the Denver metro. We toured eight properties, all boasting amenities on top of amenities, stunning views, quick lease-up periods and skyrocketing rental rates. The demand that’s driving these apartments’ success also is driving the construction industry’s feverish pace. “Builder confidence and the construction pipeline expanded, and developers are anticipated to deliver a record 12,000 or more units this year, or over 32 percent growth in apartment deliveries since 2014,” says Greg Price in his market overview on Page 4. For Colorado apartment inventory, the 2010s have already delivered more product to the market than everything that was delivered in the 2000s and 1990s, according to Apartment Insights. The 2010s are on pace to out build the 1980s as well. One unavoidable issue is the increasing cost of living within the city. With homeownership decreasing, an increasing in-migration of millennials and a cultural shift toward urban environments, multifamily rent gains are outpacing income gains at an alarming pace. According to a JLL contributed article on Page 20, rents have increased nearly 65 percent in five years, while median household incomes only have risen 14 percent. One major contributor to the affordability crunch is a lack of new condominiums coming on line due to concerns over the construction defects law. As we went to press, there were reports that Denver Mayor Michael Hancock was going to introduce his own reform ordinance for the city. Other Colorado cities have passed similar reforms. We’ll be following this issue closely in upcoming Colorado Real Estate Journal articles. The market boon is not restricted to Class A properties. In fact, older property types, especially those from the 1970s and 1980s, are seeing average rental rates almost double from 2004 to present day. I want to visit older properties to see how buildings are staying current and fresh in this amenity-driven market. There was a lot of discussions about value-add properties on the tour, and I’m eager to hear about your projects. We’ve put together a comprehensive issue that highlights many of the market drivers as well as explains what the statistics mean to the multifamily world. As we look ahead to 2016, please let me know if you’d like to see something covered or are interested in participating in an upcoming issue. I appreciate your feedback. Thanks for reading.