The last 5 years have seen a considerable boom of new multifamily residential units in the Downtown Denver area. In total -6,273 multifamily residential units have been completed within a 1.5 mile radius of the iconic D&F Tower since January 2010. This is partly due to the historic tower’s strategic location at 16th and Arapahoe, which serves as a good geographic central point to Downtown Denver.
A key factor in the continued construction of apartment properties across the metro area is a noticeable urban shift in development, which doesn’t show signs of slowing down in the near term, according to the multifamily forecast panel at the 2016 Development & Construction Summit presented by the Colorado Real Estate Journal. Given the population growth of millenials, a drop in the homeownership rate, the quality lifestyle and the job growth in Colorado – Denver is shaping up to be a top destination for young professionals and working families looking to settle down. This is a trend that is continuing in Colorado with sustained multifamily development projected throughout 2017 as the population grows.
Still, the Denver construction outlook highlights the industry’s challenges in terms of shortages in skilled labor and rising construction costs, which will continue into 2017. Current all-in construction costs for high-rise properties near $300,000-plus per unit, $240,000 per unit for midrise product and $200,000 to $220,000 for garden-style communities. Increases in construction costs have affected developers amongst which United Builders Service. In downtown and core infill areas, such local companies can still make development work as rents have kept up with construction prices. However, the increases in construction prices have killed anything in a tertiary, periphery market.
As there is upward pressure on rents stemming from growing immigration and young professionals moving from higher rent markets, construction costs are leveling off as they are not moving to tertiary markets. This means that construction of new multifamily properties is being directly impacted by the wants of the young professional.
One of the most paramount features of these new developments is the amenities available. They are more important than the actual interior of homes as the new demographic group actually attribute a greater percentage of the value of a property to its access to a number of extra features that are not considered primary to the generation of the baby boomers. In building small apartments, it becomes necessary to get out of a 600-square-foot home and use common areas, which become a secondary, defacto living room.
There is a consensus amongst local developers that multifamily construction in Denver will continue as population grows and delayed homeownership persists. Based on current trends and numbers, it’s becoming evident that home ownership is less of a priority these days and the benefits of the mobility of apartments have taken to the current leasing generation.
Assuming most of the units under construction are completed on schedule within the next year and a half, 10,829 residential units have been added to the Downtown Denver residential market from 2010-2016, with the vast majority of those (10,609) from 2012-2016. This represents an average of approximately 1,550 units per year (2010-2016) or 2,121 units per year (2012-2016). About 96% of these are rental units.
What these new multifamily residential projects are doing is filling the holes in the urban market by creating new residential complexes of a closed type that contribute to the changing landscape of Denver’s profile, thus making it appealing to a wider demographic group.