Sensational Multifamily Market Shows Weakness

DENVER-A sensational multifamily rental year in the metro area is drawing to a close, in stark contrast to the office market, according to a report by Grubb & Ellis. “Unfortunately, however, it appears that the degrading economy is finally permeating its way into the multifamily housing market,” the report notes.

Indeed, this will be the first year since 1990 when the market is not as strong as it was in the beginning of the year, according to the report. Most of the softness is taking place along the large, southeast suburban market, where most of the overbuilding is taking place, the report says.

“It’s anticipated that the economic slump will cause a significant drop in the number of potential purchasers, which in turn will create less demand and competition and consequently minimize the buying frenzy that has developed over the past decade,” Grubb & Ellis says.

But even if the number of buyers drops 20% to 30%, there are so few institutional-quality apartment communities on the market that there will still be groups bidding on them, the report says.

Still, next year buyers will have an opportunity to purchase new apartment properties at prices below previous years, because of concessions landlords are forced to offer.

“However, those that are successful (purchasers) will be rewarded as the rent concessions burn off 12 to 18 months after purchase,” the report predicts.

The report goes on to say that 2003 is poised to be a year in which rents will rise again. Construction also will slow.

“As a result, the lack of new construction coupled with the continual demand for new apartments will get the Denver multifamily housing market back to the levels it attained in 2000,” according to Grubb & Ellis.