APARTMENT REPORT
APARTMENT REALTY ADVISORS
Focus on Suburban Submarkets, Not
just the Construction Pipeline
The Patrician, a 36-unit building in
the Cheesman Park neighborhood,
sold for $175,000 per unit which is a
record for unrenovated properties.
O
ver the past three years, everyone’s
focus has been on the explosive rent
growth throughout the metro Denver
apartment market. As demand for
apartments rose during this period, overall vacancies decreased to 4.6% in 2013. This resulted in
9.8% effective rent growth year-over-year to $1.11
per square foot. Developers from around the nation
saw abundant opportunities and capital flowed into
the market for new product to meet demand.
$131,953 per unit. “Prices can’t get much higher
before you reach a replacement cost threshold. It’s
been crazy,” said Robert Bratley, Associate at ARA.
Adding, “The lack of available listings and strengthening economy, among other factors, has created
the perfect storm for owners looking to take advantage of this real estate cycle. Coastal, 1031 Exchange, and new buyers have flooded the market
and are underwriting returns this market has
never reached before.”
Despite a record year in 2013, 2014 has already
indicated it will be better by many standards. According to the AAMD Vacancy & Rent Survey,
effective rents in the first quarter 2014 increased
another 9.8% year-over-year to $1.18 per square
foot. Rents have climbed more than 22% in the
three years since the recession, and a lot of this
growth was focused on central, core locations, infill sites, and transit-oriented developments
(TODs). Today and during this three-year period,
the central and downtown Denver submarkets were
some of the most sought-after investments. Central Denver’s effective rents increased 32% and
downtown’s grew by 38%, and they’re still growing.
This has been reflected on the sales prices in these
submarkets as well. The average sale prices in central Denver have nearly doubled since 2011, to
www.aamdhq.org
AUGUST 2014 • TRENDS | 27