Housing shortage and population growth boost Denver’s record multi-family market

The Denver apartment market is a prime target for investment.

Metro Denver is a prime location for investors looking to buy multi-family assets this year, after hitting record sales volume of $8.1 billion in 2021 due to a shortage of inventory and strong demand for rental units on the market.

“Coming out of the pandemic, Denver was a top investment target for potential buyers,” said Pamela Koster, managing director of JLL Capital Markets. “Both investors who already own here and those trying to enter the market.”

Of all the deals closed in 2021 by Koster and his team, which specializes in multi-family transactions, about 30% included buyers who were investing for the first time in the Denver area.

Sales volume and new investor interest are a product of Denver’s housing situation, which is starting with an extraordinarily low inventory of available homes for sale. Home inventory bottomed out earlier this year at less than 1,200 listings, but rose somewhat ahead of the summer selling season, hitting 2,200 in late March, according to the latest data from the Denver Metro Association of Realtors.

Unable to find homes to buy, masses of new Coloradoans have turned to renting as supply constraints and labor shortages lengthen development times for new units, driving up prices. rents and creating an attractive atmosphere for investors.

“Denver over the past two years has had some of the strongest apartment fundamentals we’ve ever seen,” Koster said. bisnow.

Average effective rents in the metro area rose 19.6% year-over-year in the first quarter of 2022 to $1,776 per month, according to Denver-based multifamily analyst Apartment Insights. And over the past year, the market has absorbed a record 15,440 units.

As a result, prices for multi-family investments have reached new heights. The sale of a 107-unit boutique apartment building in Denver’s popular Washington Park neighborhood set a new record when it was sold last month.

View at Wash Park, formerly known as My Block Washington Park, at 255 North Washington St., sold for $63 million, or $803 per SF, shattering a record held by Tennyson Place for just three months after the sale of the property in December for $790 per sf.

The Denver metro area grew by nearly 820,000 people from 2010 to 2020, according to population estimates from the Colorado Bureau of Demography, although recent census data shows Denver County and some of its counterparts of the metropolitan area actually declined in population between 2020 and 2021, a symptom of the pandemic that experts say will reverse.

But a year of pandemic-influenced population decline doesn’t seem enough to scare off investors looking to capitalize on Denver’s decade-long rise, given other market dynamics.

“Denver is going to remain a favorite on investment lists for the next few years,” Koster said.

One thing that is ruffling investors is the uncertainty in debt markets, driven by rising inflation and soaring US Treasury prices, especially ahead of the May meeting of the US Federal Reserve, during which a further rise in interest rates is likely.

Investors are in a period of price discovery, Koster said, and so will tread carefully until they can get a better idea of ​​where capital markets are headed.

“Capital doesn’t like uncertainty, and right now there’s just a lot of uncertainty,” she said. “Everyone is adjusting the settings they subscribed to in the last 14 to 16 months.”