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Denver Multifamily Growth Climbs Higher

Denver’s multifamily market remained hot going into 2019, boosted by a decade-long economic and population boom that has transformed the metro, particularly its urban core, according to Yardi Matrix summer 2019 report.

Drawn by the market’s strong fundamentals, multifamily developers ramped up deliveries in 2018, when a massive supply wave of 15,984 units came online for a new cycle high. As a result, the occupancy rate in stabilized properties dropped 40 basis points over 12 months, to 94.7% as of April, the Yardi Matrix report says.

Denver rent trends

Rents in Denver rose 1.8% year-over-year through May, trailing the 2.5% national rate. The metro’s average rent stood at $1,545, above the $1,442 U.S. figure. Following the delivery of 15,984 units last year, occupancy in stabilized properties dropped 40 basis points over 12 months, to 94.7% as of April, slightly below the 94.9% national average.
Rents in the working-class Renter-by-Necessity segment rose 2.3% to $1,309, while Lifestyle rates were up 1.6%, to $1,727. Demand across asset classes remained strong in Denver, bolstered by above-average population growth, robust household formation and consistent employment gains, especially in high-paying professional services. Considering an estimated supply of more than 10,000 new apartments this year, as well as the positive outlook for the metro’s long-running demographic and economic boom, Yardi Matrix expects the average Denver rent to advance 2.6% this year.
Rents rose fastest in Brighton (6.2% to $1,526), Windsor/Greeley West (5.4% to $1,358) and Boulder (5.1% to $2,002). The CBD/Five Points/North Capitol Hill submarket, which boasts the largest pipeline and highest transaction volume, saw rents rise 2.1% to $1,970. Rents declined in Champion (-1.0% to $1,517), Fort Collins–South (-0.9% to $1,366), Longmont (-0.6% to $1,420), Fort Collins–Central (-0.1% to $1,444) and East Colfax/Lowry Field/Stapleton (-0.1% to $1,535).

Multifamily supply outlook

A total of 26,835 units were under construction in Denver as of May, most of them in Lifestyle developments. In 2019 through May, 1,857 units were completed, or 1.0% of the metro’s total stock. This follows last year’s 15,984-unit cycle peak, representing 6.1% of total stock, well above the 2.6% national average. The wave of new deliveries has put downward pressure on occupancy, which stood at 94.7% as of April, down 40 basis points year-over-year and below the 94.9% national average, Yardi Matrix says in the report.

The metro’s multifamily pipeline also included 58,307 units in the planning and permitting stages as of May. As Denver’s population is estimated to continue growing at twice the national rate through 2019, demand is expected to keep up with supply this year, supporting further rent gains.
Developers are heavily targeting the CBD/Five Points/North Capitol Hill submarket, which had 6,137 units underway as of May. The vibrant city center added 5,490 jobs in 2018, a 4.1% increase, according to the latest State of Downtown Denver report, while its population rose 13%, to more than 25,000 people. More growth is expected for the area, which is estimated to host 33,000 residents by 2023. East Colfax/Lowry Field/Stapleton had 2,489 units underway, followed by Champion (1,935 units).