Denver’s apartment-building frenzy nears end – slowdown predicted in 2018

By | | The Denver Post.

The Denver area’s apartment building frenzy will slow next year as demand for new high-end developments wanes and financing for new projects gets tighter, say economists and industry leaders.

As renters’ pocketbooks respond to rising prices and banks look to other investment projects, multifamily-unit construction will slow in the Denver-Boulder area, according to a midyear economic update in the University of Colorado’s Colorado Business Review.

Fewer units are planned for construction than are currently in production, the report states, predicting that a slowdown could begin early next summer.

The group of industry experts and economists who authored the report attributed the slowdown to decreasing property values as complexes move toward the outskirts of the city. Denver no longer has the demand for more luxury apartments. The report also notes a cultural shift: Millennials are starting to move out of rentals in or near downtown to purchase property farther from the city center.

Nearly 25 percent of units under construction in June were downtown – concentrated in neighborhoods such as Union Station, Golden Triangle and Highland — according to a report that month by RealPage, a national real estate data analytics firm. Those in the industry agree that Denver’s high-end apartment market is oversaturated.

“The reality is that (the industry is) building high-end apartments, and that is not where the majority of people moving to Denver can afford to move,” said Tim Walsh, CEO and founder of Confluence Companies, a real estate development company focused on building affordable apartments in suburban Denver. “We’re building for the top of the income pyramid, we’re not building workforce housing.”

Residential construction activity this year is down 8 percent from last year, according to Dodge Data & Analytics, an analytics provider for the construction industry.

Walsh and others said that in the past year builders have shifted toward the suburbs of Denver for a variety of reasons – topping out of demand in the city, cheaper land, less financing and the rising cost of construction.

“I think, in general, we’re plateauing,” Walsh said of the apartment market in Denver. “I think we’re close to that ceiling. … We pushed them as high as people are willing to pay.”

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