Denver Climbs

Apartment Market at High Point.

AXIOMetrics, Sophie Zatterstrom Gore, March 30, 2015.

The Denver apartment market has enjoyed a strong recovery since the Great Recession ended, and is now stronger than it has ever

Annual quarter-over-quarter effective rent growth in the Denver-Aurora Metropolitan Statistical Area (MSA) was 10.3% in 2014, the highest in at least 19 years. Denver’s market has had a strong start to 2015 as well: The latest monthly annual effective rent growth for the Denver metro, from February 2015, shows annual effective rent growth at 12.74%.

The Denver apartment market’s recent success can be attributed to four main reasons, according to apartment market research:

Job Growth

Job growth is the primary driver of rent growth, and Denver’s job growth has been gaining momentum since the end of the last recession, largely driven by the technology and green-energy sectors. Although Colorado is located on part of the Bakken shale, most jobs in Denver are in offices and won’t be affected by the oil market downturn.

The graph below shows job growth for Denver and the U.S. as a whole, illustrating the strength of Denver’s employment as of late, relative both to the national average, and to the peak in 2007. Denver’s job growth rate was 2.3% in 2007 and reached 3.6% at its most recent peak, in 2012.  In 2014, job growth was 2.9%, 80 basis points (bps) above the national average.


Denver’s population is dominated by younger age cohorts. According to Census data from 2013, some 30% of the metro’s population consisted of 20- and 30-year olds – the prime renter age group. The large proportion of younger residents is an important factor behind demand for apartments in Denver.



New Supply

New apartment supply in Denver has been absorbed quite well, adding to the success of the metro. The 8,073 units delivered in 2014 were almost double Denver’s long-term average of 4,960 units, but demand kept pace at 8,899 units absorbed. So far, new apartment unit deliveries have largely been focused on the downtown area.


Single-Family Housing Market

Another important reason for Denver’s strong apartment success is that the single-family housing market is losing strength.

The chart below shows homeownership rates in Denver. Although Denver wasn’t hit as hard as many other markets during the housing market downturn, homeownership rates have been trending downward for at least the past nine years.


Making matters worse for the single-family market is that home prices in Denver are increasing because of a shortage of single-family supply. Combined with lacking demand, largely because of a younger population that is inclined to rent (out of necessity and/or choice), the rising home prices only make it more difficult for people to own.


Axiometrics forecasts Denver’s job growth to reach 3.2% in 2015, helping maintain the metro’s strong apartment market. Annual effective rent growth, however, is expected to lower – to 4.5% – because of the impact of 9,013 new multifamily units coming to market.

Denver’s long-term average effective rent growth (excluding recessionary years) is 5.1%, so Denver’s market is still showing healthy growth – especially considering the current low inflation levels.

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