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2nd Qtr. 2022 Multi-Family Report

The Denver apartment market experienced a pronounced rebound in 2021 with high levels of demand that pushed vacancies to a near-decade low. However, Denver’s robust pipeline began putting upward pressure on vacancies in mid-2021, a trend that should continue in coming quarters. The 23,000 units under construction is a record-high for the market and will increase Denver’s inventory by 8.4%.

Downtown will bear the brunt of the supply wave. With 8,600 units underway, the Downtown submarket’s pipeline ranks second in the country, behind only Downtown Nashville. While rent growth remains robust, concession activity has risen in the urban core due to the increased availability of units. Landlords are typically offering one month of free rent during the lease-up phase. Concessions are more prevalent downtown, where 29% of properties were offering free rent or other incentives in April, compared with just 9% of properties in the suburbs.

Record renter demand in the last year has allowed landlords to push apartment rents aggressively, even with substantial supply-side pressure. With a current average asking rent per unit of roughly $1,830, Denver is still substantially more affordable than coastal markets. But Denver apartment asking rents have risen by 8.7% in the last year and are more expensive than peer cities like Austin and Nashville. Affordability is a key reason why many companies and workers relocate to the Mile High City, but the rapid rise in housing costs may change this
narrative.

The Denver City Council passed an affordable housing policy that will go into effect on July 1. New housing developments of 10 or more units will be required to set aside between 8-15% of units as affordable, depending on factors including location and the level of affordability those units will provide. In addition, the city will also be increasing its linkage fee over the next four years, which will go toward the city’s affordable housing fund. Developers who provide affordable housing are exempt from paying this fee. Opponents of the measure are
concerned that it could lead to a decline in future deliveries as developers shift focus to markets with fewer restrictions, while supporters point to a measurable number of affordable units that will become available.

With demand and rent growth surging, investors have targeted Denver multifamily assets in the last year. Sales volume was another record-breaking metric set in 2021, amounting to $10.2 billion- a level that is twice what was recorded in 2020. Recent trades have broken historic records, both in terms of total dollar amount and priceper-unit sale price.

Source: CoStar

Denver – CO-MultiFamily-Market-2nd Qtr

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