Denver has quickly become a popular metropolis for both young professionals and new businesses. Initial demand for housing led to a surge in the construction of luxury units, causing residents to look elsewhere for cheaper alternatives, flattening rents in the urban submarkets.

Potential investment opportunity has shifted to the more affordable suburbs, which benefit from revitalized shopping districts, improved transit options and safer pedestrian thoroughfares.

JLL’s Denver multifamily team has identified five submarkets worth looking at in the metro Denver area for continued rent growth.

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Aurora

One of the more affordable and ethnically diverse submarkets in the area, Aurora’s proximity to downtown Denver has led to rapid expansion and year-to-year rent growth of 6.8% as of June 2016. The area also accounts for only 5% of housing units under construction in Denver, and most of its stock was built in the '80s, so existing supply is less affected by new supply entering the market. A new commuter railway running along I-225 will also soon increase commuter access from Aurora to Denver. Aurora Southlands, a nearby fashion, dining and entertainment space in the southeast section of the suburb, has become a magnet for the growing population.

RiNo

The warehouses of Riverside North (RiNo) have transformed into breweries and artisan shops, a likely factor contributing to the 4.7% rent growth observed in December 2016. The revitalized spaces are attracting young artists and professionals, and have also appealed to businesses. The World Trade Center under construction at 38th and Blake, for instance, will bring an influx of office and retail space when construction finishes in 2019. RiNo is also undergoing several infrastructure upgrades. The Brighton Boulevard Redevelopment includes new concrete pavement, curb and gutter, cycle track, sidewalk, drainage, stormwater quality treatment, landscaping, street lighting and traffic signal replacement. (Check out a flyover here!)

Wheat Ridge

Wheat Ridge used to be known for its agricultural production before transforming into an affordable, age-restricted suburban bedroom community. Like Aurora, development in recent years has been minimal, with most assets built before 1975. But residential development is on the horizon. In 2016, Phoenix-based developer Evergreen Devco took control of Clear Creek Crossing, and plans to transform the property into 250 multifamily apartments, entertainment facilities, restaurants, a pair of hotels, a 35-acre office complex and a Super Walmart.

With 10% rent growth observed over the past year, Wheat Ridge has raw investment potential.

Arvada

With a future $30M transit hub, the new Arvada Gold Line will connect the suburb to Denver’s Union Station and to Olde Town, a development combining shopping, restaurant and cultural experiences. A Walmart will soon be accessible on Ralston Road, and the 370k SF Arvada Marketplace will bring additional shopping by late spring 2017. Despite the surge in improved mixed-use properties, only three new apartment projects delivered in the area in the last decade, leaving 67% of the housing inventory with units constructed in the '70s and '80s. Occupancy also remains tight, at a sub-4% vacancy.

The suburb experienced the greatest rent growth of all submarkets in 2016, a staggering 11.3%.

Colorado Springs

In April 2016, Colorado Springs ranked No. 12 on the National Association of Realtors' list of the top 20 hottest real estate markets in the country. That distinction was largely due to the speed at which buyers purchased single-family homes, a consequence of rising rents in the area. Colorado Springs also has a sizable military population, so deployment has historically affected rents and vacancy.

In 2016, however, JLL reported 8% rent growth in the suburb, double that of metro Denver, and 5% vacancy. With rent nearly $400 cheaper than Denver on average, Colorado Springs is due for a continued growth spurt.