Multifamily Pricing Surges in Denver Suburbs

Multifamily prices in Denver’s suburbs are rising. As part of the trend, Ridge at Wheatlands, a 338-unit apartment complex in Aurora, CO, has traded hands for $91.25 million or $270,000 per unit—a record-breaking price-per-unit in market. Rapid economic and population growth in Denver has attracted national attention, and now that growth and capital is spilling into the surrounding suburban markets.

“Incredible market fundamentals are the biggest driver of multifamily price increases in Denver. The Denver economy is creating jobs at a rapid pace and attracting young, talented workers to the area,” Terrance Hunt, vice chairman at Newmark Knight Frank and a broker on the deal, tells GlobeSt.com. “While these workers are affluent for their peer group they are still hard pressed to break into the for-sale housing market, which has a real shortage of entry-level inventory. This trend has resulted in record-breaking apartment demand—2018 set an all-time Denver record for apartment absorption—rising rents, and rising sale prices. Investors are attracted to the long-term growth perspective in Denver and are looking to establish or expand their footprint in the market.” In addition to Hunt, Vice Chairman Shane Ozment and Executive Managing Director Chris Cowan also worked on the deal.

The Ridge at Wheatlands is certainly an example of the rising prices and investor interest, but the quality of the property also helped to reach the record sales price. “Ridge at Wheatlands’ record-breaking pricing for the Aurora market speaks to the quality of the asset and its ability to command strong rents,” says Hunt. “Investor bidding has pushed cap rates down and sale prices up. What investors are most attracted to in this submarket, and others is a strong school district and proximity to retail. The Ridge at Wheatlands is minutes from the 1.7 million-square-foot Southlands Mall, one of the largest shopping resorts in metro Denver.”

Like Denver, the suburban markets are also seeing interest from a diverse range of capital sources from across the country, including investment partnerships and institutional REITS. “Avalon Bay, a publicly traded REIT, won the deal,” says Hunt. “We have seen high-quality buyers with a national presence make strong runs at all of our recent listings, particularly those in suburban locations as there is a trend of investors towards buying in the suburbs. The offers received on Ridge at Wheatlands are certainly a microcosm for the market as a whole.”

Denver is still early in its growth cycle, and Hunt expects millennials to continue to migrate to the market. “The Denver market and population have been expanding since 2008, largely due to millennial in-migration; because more millennials are aging out of downtown living—getting married and having families—but still have a propensity to rent, the market is transitioning out of the first wave of core growth and into suburban growth in multifamily,” he says.

Suburban multifamily product is well positioned to take advantage of that growth, especially with the increase of single-family home prices. “In suburban areas, housing prices are up over 90% in the past 10 years, while rents are up approximately 60%, making it more attractive for those moving out of downtown to continue to rent in the suburbs,” says Hunt. “The Denver market continues to grow in all facets and suburban areas continue to attract investors as they identify these opportunities to purchase assets with strong renter demand.”