DENVER-During the past 12 months, investors snapped up more than $1 billion in apartment communities in the Denver area, Marcus & Millichap reports in its latest Apartment Research Report. That is a 34% increase over the previous 12-month period, the report notes. The median price during the most recent period is $62,250 per unit, a 3.8% increase over the previous period.

"Denver's apartment market offers investors healthy current income and potential for asset appreciation," the report notes. "With the economy poised for solid growth, and new supply limited, effective rents will continue to grow at a steady pace. Moreover, prices have room to appreciate, particularly when compared with other markets where prices have been driven to unprecedented levels. Thus, Denver apartments are gaining interest from investors confident in the market's s near-term performance and its long-term prospects."

The report says with employment growing strongly and only 600 units added in the first half of 2005, the vacancy rate is expected to fall 160 basis points to 7.9% by the end of 2005. A total of 1,830 apartment units are slated for delivery this year.

The report notes that Denver employers are on track to add 29,500 positions in 2005, a 2.5% increase from the previous year. The professional and business services sector is forecast to add almost 7,000 jobs, followed by the leisure and hospitality sector, on track to add 3,900 positions, the report notes. Many of these people, at least initially, are expected to be renters and not homebuyers.

With the fundamentals of supply and demand in place, rents are expected to rise. Asking rents are expected to increase by an average of 1.5% in 2005 to $834 per month. "With vacancy improving, owners are beginning to limit concessions, and effective rents will rise 2.7%," Marcus & Millichap predicts.