Q2 2012 Denver, Colorado Apartment Submarket Trends

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Q2 2012 Denver, Colorado Apartment Submarket Trends

The Denver Core Area

  • The large-scale commercial redevelopment of LoDo (Lower Downtown) and the Central Platte Valley (CPV) area adjacent to it has been central to drawing both high-end apartment and condominium development to the core area.
  • Overflow to the Highlands neighborhood to the northeast across I-25 and the Platte River, the site of numerous new fashionable restaurants, also has been a factor.
  • Highlands, the CPV and other surrounding areas are included within Reis’ Denver-North submarket.
  • Downtown Denver proper is covered in the adjacent Denver-Downtown submarket.
  • No market-rate apartment projects completed construction in either submarket in 2011 or the first quarter of 2012.
  • During the second quarter, 324 units in three projects were delivered in Denver-North.
  • Fully 1,760 in nine projects were underway in the core area per the date of this report, eight in Denver-North, one in the Denver-Downtown submarket.
  • For its assorted core area neighborhoods (which include areas beyond Reis’ two core area submarkets), an August 2012 report by Downtown Denver Partnership (DDP) reports 5,890 apartment units under construction or planned, up from the 5,582 reported as of April, up from 3,719 in January.
  • Only 96 for-sale units were underway or planned as of August, up from 50 in April but down dramatically from a few years ago when the condo boom was in full swing.

Core Area: Denver North (CPV; Highlands; LoDo)

  • The 324 units that completed construction here during the first half of 2012 (all during the second quarter, see below) were accompanied by 179 units of net absorption. The second quarter net absorption total was 185.
  • Reis reports 1,529 units under construction in eight projects in its Denver-North submarket per mid September. Planning is extensive.
  • Of the above-referenced projects, only one, with 126 units, has been assigned a 2012 completion date.
  • The 134-unit Manhattan II Apartments at Bassett & 18th Street completed construction in June at that address in the CPV.
  • The $32 million, five-story, 134-unit Manhattan II luxury project at 19th and Bassett completed the same month. General Investment and Development Company (GID) developed the project.
  • The final completion to date was the April finish of the 55-unit Prospect on Central at 17th and Central streets in the Highlands neighborhood. Construction began in June 2010.
  • V. Robert Salazar was the developer.
  • An October finish is scheduled for the four-story, 126-unit Highland Park project at 30th and Zuni in the Highlands neighborhood. Heitler Development is the developer.
  • Other projects under construction are led by the five-story, 310-unit 2300 Walnut in the CPV, which broke ground in July 2012. Reis expects completion in January 2014. Mill Creek Residential Trust is the developer.
  • The 301-unit residential component of the first phase of the Denargo Market development broke ground in November 2011 at W. 29th Street and Brighton Boulevard. The completion date was not specified.
  • A June 2012 start is reported for the 13-story, 220-unit Cadence Apartments at Chestnut Place and 17th Street in the CPV. DDP expects completion in 2014. Zocalo Community Development is the developer. (Zocalo completed the 120-unit Solera at Lawrence and 20th in late 2010.)
  • Alliance Residential’s 164-unit, six-story Broadstone Blake Street project at 22nd and Blake streets broke ground in May. DDP expects completion in 2014.
  • The 205-unit RiNo Center Apartments broke ground in November at 31st Street and Brighton Boulevard (RiNo stands for River North). The completion date was not specified.
  • The 130-unit, five-story Highland Bridge Flats from Holland Partners broke ground in November 2011 at Boulder and 16th streets in the Highlands neighborhood. The completion date was not specified.
  • Following several years of delay, community opposition and downsizing of the plan, site preparation has begun for A.G. Spanos’ 265-unit Element 47 project off W. 23rd Avenue on the west side of I-25. DDP expects completion in 2014.
  • DDP expects a 2012 start for the 332-unit, five-story 2785 Speer project at that Speer Boulevard address (at Alcott). The completion date is not specified. Allied Realty Group is the developer.
  • The nine-story, 312-unit apartment component at Nichols Partnership Inc.’s $82 million, 20th Street and Chestnut Place mixed-use development in the CPV is planned. DDP expects completion in 2014.
  • Other major planned projects include the 280-unit, five-story Alta City House project from East West and Wood Partners. DDP cites a 2013 expected completion date.
  • AMLI Residential is planning the 242-unit, five-story AMLI at Riverfront project for a three-acre site at 19th and Little Raven in the Riverfront Park area of the CPV. DDP reports a planned 2014 completion date.
  • Corum Real Estate has proposed a 319-unit, 11-story project for 1800 Market Street in LoDo. A development schedule was not available per report date.
  • A new project. The 10-story, mixed-use development underway at 16th and Market, called 16M, “near the white-hot LoDo area,” will include four floors of luxury apartments, the Journal reported in August. DDP cites a 47-unit apartment component expected to start by year-end. Elevation Group LLC, Integrated Properties, and Sage Hospitality are the developers. A retail element also is included.
  • An old landmark. Pagliacci’s, a 66-year-old historic Italian restaurant at W. 33rd Avenue and Navajo in the Highlands, closed in July. It will be replaced by a five-story apartment building, The Denver Post reported at the time.
  • Vacancy in Reis’ Denver-North submarket has dropped sharply during 2011, ending at 4.8%.
  • With newly delivered supply exceeding absorption in the short term, the vacancy rate had risen to 8.4% by the end of the second quarter of 2012.
  • Rent growth has been positive, but off the heady pace seen in 2011.
  • At $1,590 and $1,441 per month, respective asking and effective average rents for the second quarter were up 1.7% and 2.1% since year-end following gains of 5.3% and 6.0% all told last year.
  • Outlook. Reis’ revised forecast calls for vacancy to decline to 6.5 % by year-end as most of the year’s new supply is absorbed. Vacancy should continue to decline in 2013 but could rise again in 2014.
  • Gains of 3.6% and 4.5% currently are projected for the respective average asking and effective rents for 2012 all told. Slightly lower growth rates are expected for 2013.
  • “As competition for renters in this area heats up,” notes Marcus & Millichap,
  • “concessions may need to be expanded in some existing properties to attract and retain tenants, cutting into operator income streams.”

Core Area: Downtown

  • No units completed construction in the Denver-Downtown submarket in 2011 or year to date in 2012. One project is underway (see below).
  • First half 2012 net absorption was 34 units. Minimal vacancy, however (see below), is likely a chief cause for the low number.
  • Indeed, Reis reports only 55 vacant market-rate units throughout this submarket as of mid-year.
  • The 231-unit, nine-story 2020 Lawrence project at that address from Zocalo Development is scheduled to complete in January 2013.
  • Proposed are 289 units at the 10-story 13th and Cherokee Apartments (a.k.a. O2xygen) at that address. Skip Ahern is the developer. DDP expects a 2012 construction start.
  • AMLI is planning the 235-unit, five-story 21st and Lawrence project. DDP expects construction to start by year-end.
  • Second quarter vacancy was just 1.8%, down 10 basis points from a quarter earlier, down 290 year-over-year.
  • Erratic rent growth in 2011, following large gains in 2010, resulted in a relatively flat performance (small gains only) for the year.
  • Losses in the first quarter of 2012 were followed by gains the quarter after. At $1,142 and $1,076 per month, respective asking and effective averages for second quarter were up 1.2% and 1.4%. Respective year to date growth rates were positive at 0.4% and 1.1%.
  • Outlook. Third quarter’s delivery of 231 units will push supply for the year slightly above the year’s projected net absorption total. A similar supply-heavy imbalance is expected for 2013.
  • Vacancy should end 2012 at 4.1%; a rate of 7.6% currently is expected for 2013. Gains of 2.7% and 3.6% are projected for respective asking and effective lease rates for the current year. Next year’s gains should be similar.

Other Denver

  • Development has been lighter elsewhere in the city.
  • Alliance Residential, continuing to “express confidence in metro Denver’s growing apartment market,” according to the Journal, broke ground in February for the 161-unit Broadstone Gardens at Cherry Creek at Alameda and Jackson (in the Denver-Central submarket). The completion date was not specified.
  • June followed with the start of Wood Partners’ 338-unit Alta Alameda Station at W. Alameda and Cherokee, a transit-oriented development (TOD) project near a new light rail station (the line is under construction). The completion date was not specified.
  • Other projects, some of them large scale, currently are in the works.
  • The Journal cites a late-July groundbreaking by RedPeak Properties for the $65 million, 302-unit, four-building, five-story One City Block apartment project at 19th Avenue and Logan Street, bordered by Pennsylvania Street and 18th Avenue, to the near east of downtown proper. DDP expects completion in 2013.
  • One of a few major hospital site redevelopment endeavors concerns the former
  • University of Colorado Hospital campus at 9th and Colorado Boulevard in east Denver. Fuqua Development, following its split with The Sembler Company, is now the primary developer of the 28-acre project.
  • More. Plans for the $150 million mixed-use redevelopment include the 325-unit Broadstone at Ninth apartment complex by Alliance Residential, according to the Journal.
  • More. Community opposition has arisen to a Walmart store planned for the retail component. “[W]ithout the Walmart as an anchor, the development likely would stall,” an executive with Fuqua informed the source.
  • A 288-unit, six-story project is planned by Carmel Partners for Colfax and Osage south of downtown, about five blocks from the 10th and Osage light rail station (within the Denver-Central submarket).
  • At W. 10th and Osage, Denver Housing Authority is planning a 457-unit project, part of a 1,200-unit phased development, reports DDP.
  • Reis reports 119 condominium units planned at the 1000 Speer high-rise project by Snavely Development for that address, also within Reis’ Denver-Central submarket. DDP, reporting 260 rental units at this location, expects a start by year-end.
  • Also planned is Hampton Partners’ 260-unit, 17-story project at 8th and Lincoln, to the near immediate south of downtown. DDP expects a start by year-end.

In the Stapleton redevelopment area in east Denver (the Denver-Northeast

  • submarket), the 118-unit Eastbridge Apartments is under construction at E. 29th Drive and Geneva Court for completion this October.
  • In the same submarket, the 85-unit first phase of Aster Town Center Apartments completed construction in July at 3131 Rosslyn Way. A 135-unit second phase is planned.
  • A 213-unit project is underway at 2011 S. University Boulevard in south Denver within the Denver-South/Glendale submarket. Reis cites an April 2013 delivery date.
  • For its Denver-South/Glendale, Denver-Central, Denver-Northeast, and Denver-Southeast submarkets, Reis put second quarter vacancy rates at 5.0%, 4.0%, 4.0%, and 3.8%, respectively.
  • Respective monthly average asking rents for the quarter were $825, $994, $936, and $862 per month, all up from the quarter before.

Southeast Suburban/I-25 Corridor

  • The suburban southeast (chiefly Arapahoe County and, to its immediate south, Douglas County) has been a leader in population growth and residential development over the years.
  • No market-rate apartments completed construction in either submarket in 2011 or year to date in 2012.
  • TOD. Mixed-use transit-oriented development has played a major role along the I-25 corridor from the Denver Technologies Center (DTC) south of the I-25/I-225 interchange as far south as Lincoln Avenue in northern Douglas County, where a recently completed FasTracks light rail line terminates.
  • Respective net absorption totals in the Arapahoe and Douglas County submarkets for the first half of 2012 were 39 and 72 units.
  • Two projects with a combined total of 569 units, both in Douglas County, are under construction, as described below. Both are located in Lone Tree near the Lincoln Avenue station and the huge and evolving RidgeGate master-planned development, as follows:
  • The 281-unit Element at RidgeGate broke ground in March 2012 at Park Meadows Boulevard and Lincoln Avenue. The completion date is not specified.
  • After a hiatus, work on the 288-unit Cache luxury apartments just east of I-25 on Lincoln Avenue resumed in August 2011. Shea Properties is the developer. The completion date is not specified.
  • Belleview Station. After a delay of some four years, development of the 51-acre Belleview Station TOD is finally “starting in earnest,” the Journal reported earlier in the year. Front Range Land and Development Company are the primary developers.
  • More. A 352-unit apartment complex by Holland Partners is under development in the Belleview Station area (Arapahoe County), the Journal reported in late August. A retail component is included.
  • Forestar Group Inc. and Guggenheim Real Estate LLC have formed a “multifamily venture” for development of 360°, a 304-unit luxury apartment project at E. Peakview and S. Syracuse Way within the Denver Tech Center market, “a few blocks from the Arapahoe Light Rail station,” Real Estate Weekly News reported in July.
  • More. Reis cites an October 2012 groundbreaking date.
  • Arapahoe County submarket vacancy ended the quarter at 5.2%, unchanged for the period, down 70 basis points year to date.
  • Second quarter average asking and effective rents were $1,247 and $1,095, respectively, up fully 0.2% and 0.4% from the prior quarter following gains of 1.5% and 2.1% during the first quarter.
  • Douglas County. Vacancy ended the second quarter at just 3.5%, down 10 and 210 basis points, respectively, from one and four quarters earlier.
  • Second quarter average asking and effective rents were $1,204 and $1,058, respectively, up 1.7% and 1.8% for the quarter, up 2.6% and 3.1% since year-end.
  • Outlooks. Both submarkets should see modest additional improvement over the remainder of the year.

Northwest/Arvada-Broomfield

  • No market-rate apartment projects completed in 2011 or year to date in 2012.
  • With several large projects recently breaking ground, construction has increased markedly, however, with activity centered on the Highway 36 (Boulder Turnpike) corridor in Broomfield, as described below.
  • Net absorption in the Arvada-Broomfield submarket in first half 2012 was zero. With vacancy running low, however (see below), only 439 market-rate apartments were vacant in this submarket at mid-year.
  • Reis reports 1,193 market-rate units under construction as of mid September, as follows. None had a specified completion date per the date of this report.
  • The 378-unit Arvada Station project at W. 52nd Place and Kipling Street, Arvada, began construction in August 2011. Embrey Partners is the developer.
  • An October 2011 start is indicated for ALMI Residential’s 343-unit AMLI Interlocken near the intersection of Interlocken and Eldorado boulevards, Broomfield.
  • The 272-unit Arista Uptown Apartments from Smith/Jones Partners LCC broke ground in December near the Arista Place/Uptown Avenue interchange in the
  • Arista master-planned development off Highway U.S. 36 in Broomfield.
  • More. In addition, construction has begun on 1,500 multifamily units of unspecified type at the Arista development. The 165-unit Arista Apartments also is included on the list of planned projects.
  • The 200-unit Arvada Ridge project is underway at Kipling and W. 50th, Arvada.
  • Planning includes 400 units in two phases of the Interlocken East complex at State Road 128 and Interlocken Parkway, Broomfield.
  • Wood Partners is planning the 297-unit Alta Harvest Station for a site at Wadsworth and 118th, Broomfield.
  • Vacancy ended the second quarter at 3.9%, down 10 and 60 basis points for the period and year-over-year, respectively.
  • Second quarter average asking and effective rents were $882 and $786, respectively, up 0.8% and 1.0% for the quarter following gains of 1.1% and 1.4% the quarter before.
  • Outlook. Positive absorption over the remainder of the year should result in additional declines in vacancy and strong rent growth.

Other

  • Aurora. The 168-unit Savoy at Hampden Town Center phase II completed construction in April at E. Hampden Avenue and S. Dallas Street, Aurora-South.
  • Littleton. Wood Partners’ 280-unit Alta Aspen Grove at completed construction in February at 7317 S. Platte River Parkway in south suburban Littleton.