Quick Facts – 2011 Review and 2012 Forecast
Courtesy of Hendricks and Partners
Review 2011
Employment growth returned to the Denver Metro Area in 2011, with a net gain of nearly 7,200 jobs, equating to a 0.6% increase. Having not fallen as deep into recession as many other metro markets, Denver performed well on many fronts, especially within the housing sector.
At last report in November, single-family, sales were up 15.1% from a year ago, while the median price for all homes was off slightly, dropping 1.2% to $210,000. Unsold inventory shrunk by 37% from a year ago to the lowest level in a decade, and was below a five-month supply amidst scattered reports citing a lack of quality for-sale housing available to buyers. A tightening of supply was also evident in the apartment sector, with a high level of demand pushing occupancy to its highest level in a decade.
- Net apartment absorption in 2011 added to 2010′s hefty gains, with 2,548 units absorbed. With this performance, demand outpaced new deliveries by 68% over the past two years.
- New apartment completions totaled 1,302 units for the year, the lowest annual total since 2007, and well below the past decade average of 3,384 units each year. The most significant addition to inventory for the year was a 510-unit community that began lease-up in Aurora.
- The volume of multifamily permits accelerated in 2011, with permits for 2,180 apartment, townhome, and condo units issued, up from permits for 1,148 units in 2010. Even with increased developer interest, the permit count for multifamily structures in 2011 was down about 50% from the past decade’s annual average of 4,497 units.
- Reaching its lowest level in 11 years, the overall average apartment vacancy rate declined to 4.8% at the close of 2011, but still remained well shy of challenging the 2000 low of 3.0%.
- The average market rent noted a 3.0% gain for the year, rising to a new high of $948. Even at this level, monthly rental payments remained below monthly homeownership costs by about 20%.
FORECAST 2012
Leading indicators point toward sustained economic gains for the Denver Metropolitan Area in 2012-2013. Toward the close of 2011, the Mountain Region overall economic index marked the 25th straight month to rise above growth neutral, and one-third of firms surveyed reported they expect to add workers over the next six months, while only 13% anticipated layoffs. Forbes ranked Colorado the fifth-best state for business and careers, paying special tribute to its highly educated workforce, as well as high quality of life. Moreover, Denver ranked 10th for best cities to relocate to by Harris Poll.
Enplanements to Denver may be reflecting the above sentiment, and were up 2.1% in 2011 from the year prior, with August setting a “highest-ever” record for that month. Significant 2012-2013 economic growth drivers for Denver include renewable energy companies, such as Vesta, which is setting up operations in Denver, and GE’s new solar manufacturing facility near Denver International Airport. Continued build-out and expansion of the country’s now largest medical center, Fitzsimons, which includes the recent ground breaking of a new VA Hospital, will serve as a stimulus for new jobs, as will the on-going build-out of Denver’s FasTracks light rail, which is spurring small business creation and investment along the route.
Population growth enhanced by net in-migration (20,000 to 30,000 per year), especially from Gen Y and young professionals, is one more growth driver serving the Denver region well. All told, job growth should rise to 1.7% in 2012, with the metro area securing a stronger gain of 2.5% in 2013.
- With job creation underway, and with local single-family homeownership becoming less attainable for more residents due to a lack of supply and due to higher monthly expenses as mortgage lending rates inch higher, apartment demand will remain favorable, at 2,800 units in 2012 and 3,500 units in 2013.
- New apartment completions will total about 2,500 units in 2012, with much of that total slated for Denver proper. Further out, the region should gain 8,000-9,000 units in 2013-2014, with Denver the development leader once again, although Broomfield City and Arvada will be host to several new developments.
- The average apartment vacancy rate will tighten further in 2012 to 4.5%, holding near to this level the following year.
- Apartment owners will have a clear path ahead for rental rate increases, which are expected to rise 4.5% in 2012 and 5.0% in 2013, with the Denver metro-wide average rent attaining a new high of $1,040 by close of the forecast period.
Filed Under: Apartment Market
