We keep saying Denver multifamily is hot. But it took ARA's Chris Cowan to really point out just how hot at our first annual Denver Multifamily Summit. (The reason we needed convincing was the famous Boy Who Cried Multifamily incident of 2012.)
Chris laid out the fundamentals
for our audience of more than 150
at the Four Seasons Hotel this past Wednesday: As of Q1:
- Average rents were $1.13/SF, a 6.5% bump since last year. Focus only on Class-A and, "We've probably seen double-digit rent growth."
- Vacancies are a touch under 5%, down from 5.3% a year ago.
- Landlords absorbed 1,000 units, on track to surpass the 4,500 units average annual absorption.
- More than 13,000 units are under development with another 18,000 in the planning stages.
Wood Partners' David Jaudes
offers two reasons for this active market: "I think the demand side is really being driven byÂ
." Plus, average home values in Denver are $255k, well above the national median of $178k. "We're the 18th most expensive housing market in the country
, and the 17 ahead of us are entirely on the East Coast and West Coast." (It makes Top 18 reunions tough, but we all make sacrifices.) He also revealed that Q2 rents will post the fastest growth in Denver history
One panelist questioned
just how deep the demand
for apartments will be as rents—mainly in Downtown—surpass the $2/SF holy grail mark
. The traditional third of salary going for housing means someone needs to make $55k/year to afford the $1,500/month rent rate. (We're told we should also reevaluate our policy of putting the other two-thirds toward Entenmann's products.) "What we're seeing in the technology industry, which is one of the growth industries in Denver, is an average salary [at $55k/year] right out of school," says Nichols Partnership' Randy Nichols.
But he questions as rents escalate further, how Millennials (80% of which want to live Downtown Denver) will afford Downtown living.
Shears Adkins' Chris Shears
(above) used his son, Andrew
, as an example of the mindset of the Millennial renter: Andrew is leaving Boulder because "it's not diverse enough" and wants to go to school in NYC. But after a recent trip to Berlin, that desire changed. Chris says his son told him he wants to stay and live in the German capital. "[Millennials] values and their attitudes are so much different
and that's what's driving our future," Chris says. (What's the German word for Millennial?)
Griffis Blessing's BJ Hydl
says there are opportunities
outside of Downtown with renters looking for a better price. Wood's David says his firm is seeing opportunities in Fort Collins
and especially along FasTracks
rail line. For instance, at its Alameda Station project—"even without have a clubhouse to show"—David says the firm signed 71 leases
and is above 10% pro forma.
Speaking of Denver multifamily, Behringer Harvard laid out plans
today for its Prospect Park project, a two-story, 296-unit
apartment community at Huron and W. 29th streets near Coors Field
and Union Station. Being developed by Edwards Cos, Behringer Harvard's Opprtunity REIT II provided mez construction
financing (with BMO Harris Bank N.A. for overall construction financing) that should deliver by the middle of 2014
. (After which, its rendering should be sent to the Smithsonian American Art Museum
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