The record 2022 boom in Denver apartment construction is about to supply the city with a swath of new housing units renters sorely need, but it could mean slower rent growth for property owners, especially downtown.

Last year, Denver developers delivered more than 2,200 multifamily units in downtown, according to CoStar data compiled by Unique Properties. About 77% of those apartments were absorbed over the last 12 months, which was almost seven times greater than the absorption rate measured by Colliers during Q1 2022. Still, the crush of new supply increased Denver’s apartment vacancy rate to more than 8.6%, a full percentage point above the metro area’s average vacancy rate.

“Downtown [Denver] will bear the brunt of the supply wave,” Unique Properties’ Q1 2023 market insights report says.

Construction activity continues to soar. There are more than 31,000 units under construction in the Denver metro area, which is a record high, according to the data. Once completed, Denver’s inventory could expand by almost 11%.

There were more than 9,000 units under construction during Q1 downtown, about 16% of the metro area’s total, the data shows. There is also a swell of activity along Denver’s light rail tracks and in the River North business district.

“While most development has been concentrated near downtown, there has been a notable uptick in activity near the last light rail station before reaching the airport in east Denver, the 61st & Peña Station,” the report said, referring to projects such as the 238-unit AlfaCharlie complex and the 196-unit complex on North Tower Road that are set to deliver this year.

That expansion of inventory could have a negative impact on the city’s average asking rent, which is already showing signs of slowing. The metro area’s average asking rent stood at about $1,800 in Q1, a 1.6% year-over-year growth rate. Downtown Denver had one of the lowest growth rates over the last 12 months at a 0.5% increase.

The data also suggests that renters are seeking affordable housing options in more suburban markets like Adams and Jefferson counties. A recent analysis from Point2Homes found 80% of the suburban areas surrounding Denver are more affordable than the city itself, which is one of the highest shares in the country.

There are a couple of bright spots for Denver’s multifamily landlords going forward. The city is forecast to have higher-than-average job growth in high-paying industries such as mining and professional services over the next five years, the report found. Meanwhile, the Denver metro area is also expected to outpace the national average in terms of population growth, which could increase demand for apartments in the near future.