Apartment Perspective

An Analysis of Apartment Market Conditions and Trends in Metro Denver, Colorado Produced Quarterly by James Real Estate Services, Inc.

Denver is a popular apartment market for developers, lenders, investors and renters. The metro area benefits from a healthy economy, attractive natural and built environments and a welcoming attitude towards newcomers. These factors combine to generate apartment development and demand.

The amount of apartment construction underway and planned in metro Denver is extensive. Rental rates had been increasing due to strong demand, but the amount of new apartment construction coming onto the market is causing conditions to weaken. Over the long term Denver remains an attractive market for apartment investment but it is important to be cautious since 2016 may be the year when the market enters a correction phase.

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    • The Denver Apartment Market – Fourth Quarter 2015

      Summary

      Denver is a popular apartment market for developers, lenders, investors and renters. The metro area benefits from a healthy economy, attractive natural and built environments and a welcoming attitude towards newcomers. These factors combine to generate apartment development and demand. The amount of apartment construction underway and planned in metro Denver is extensive. Rental rates had been increasing due to strong demand, but the amount of new apartment construction coming onto the market is causing conditions to weaken. Over the long term Denver remains an attractive market for apartment investment but it is important to be cautious since 2016 may be the year when the market enters a correction phase.

      The Denver Apartment Market

      The apartment market in metro Denver contains 206,643 units in apartment properties of 50 units or more. The City & County of Denver has the largest number of units, followed by Arapahoe County. Development is active in all seven counties, especially in Denver. Transit-oriented and downtown projects comprise many of the metro Denver apartment properties underway and planned. A limited amount of development of rental apartments is taking place in projects with less than 50 units. The following table shows, by county, the number of units in projects of 50 units or more existing, under construction and proposed at the end of the 4th quarter of 2015. Not all of the proposed projects are likely to be built, and others will subsequently be announced. In addition the table lists the number of units started and completed during the 4th quarter of 2015 and for all of 2015

      The Denver Economy

      Apartment demand is driven by several factors, including population growth and the health of the local economy, measured primarily by growth in employment. Apartment demand, defined as net absorption (physical occupancies minus departures), is also affected by demographics. In Denver, for example, the influx of younger residents or “millennials” benefits apartment demand, as does the rising demand for apartments by older “lifestyle renters” who no longer desire the responsibilities of property ownership. To some extent the number of college and university students also affects the market, especially in Boulder. In terms of younger renters, however, it is important to recognize that many are burdened by student loan debts and may not be making adequate salaries to justify renting some of the more expensive apartment units popular among developers today. The following table shows employment and unemployment data from the US Bureau of Labor Statistics for the US, the State of Colorado and metro Denver. Data is for November 2015 and is preliminary. The Bureau of Labor Statistics defines Boulder as a separate metro area for statistical purposes. Change is from the same period one year before....

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