On March 13, the Colorado Real Estate Journal hosted its annual Multifamily Owners and Managers Conference and Expo. The Conference assessed the present and future of Colorado’s multifamily housing market with an emphasis on the Denver metro area. Speakers included economists, consultants, property managers, lenders, investors, and developers. They canvassed topics ranging from the demographic, political, and sociological forces driving Colorado’s multifamily market, to current market lending terms and expected investor returns and grappling with the diminished supply and rising costs of construction labor. The presenters’ general consensus is to approach the multifamily housing market in the Denver metro area with caution. Factors supporting development include projected population and job growth, the costs of buying and owning a home in the area, Colorado’s quality of life, the redevelopment of Union Station, and Denver’s national status as a burgeoning metropolitan city. Countervailing considerations include overbuilding, rising construction costs, tightening regulations on lending, and tapering rent increases.
A few other highlights from the conference are below:
- Based on the numbers of building permits issued, there are roughly 20,000 new apartment units in the Denver metro pipeline. Based on a number of factors, including construction delays resulting from labor shortages, however, the number of units delivered in 2014 is expected to fall far short of that number.
- Prospective tenants are showing an increasing demand for distinctive amenities and community elements. Two of the most popular are amenities for pets and bicycles, including dog parks, dog-bath stations, secured bicycle storage, and bicycle mechanic areas equipped with work stands, tools, and, in some apartment communities, a mechanic. Tenants are seeking apartments with community areas that have all the trappings of their units to augment their living spaces, be it a community lounge with multiple large flat-screen LCD televisions or a communal wine cellar.
- While the Denver metro area garners the most attention with respect to multifamily housing, other markets in the state are also performing well and may present opportunities for development and investment. Based on rent growth and vacancy rates, the Greeley market was strong in 2013, and the average apartment rent in the Fort Collins-Loveland market rivals the Denver metro area’s average rent.
- Developers are seeing marked increases in the cost of construction labor. Multiple developers stated that over the past 24 months, these costs have grown anywhere from 20% to 30%.