Denver | DenverMultifamilyAdvisors.com

Micro-apartments planned for small downtown parcel – BusinessDen

February 26, 2016 by The Lawson Knowlton Team

The site of a downtown day care center could soon grow up

Source: BusinessDen Micro-apartments planned for small downtown parcel – BusinessDen

Urban Villages, along with Jeff Hermanson of Larimer Associates, has a contract to buy a small lot just across from the Webb Building for $2.5 million in a deal slated to close in December. They’re planning to build micro-apartments, a new restaurant space and small micro-restaurant stalls to try new concepts.

The project was referred to as a $60 million development at a Feb. 22 Denver City Council meeting, where the sale was approved by a 10-1 vote. The property is a single triangular parcel bounded by 14^th Street, Colfax Avenue and Court Place. It covers 0.24 acres.

Hermanson said at a Feb. 16 council meeting that it’s a tight spot and will present several development challenges. Plans call for only a few car-share parking spots.

“Our project will embrace public transportation, car share, Uber and bikes,” Hermanson said during the Feb. 16 meeting. “In fact, we’re talking about calling it ‘Bike Hotel.’”

The purchase agreement requires the buyers to submit a conceptual plan for the development by the time the deal closes. Larimer Associates said in a statement that it plans to complete the development by summer 2018.

Right now there is an 8,400-square-foot building on the site. That building will come down to make way for the new development.

Denver Warm Welcome Court Childcare operates out of the building. It’s a day care service that watches over kids while their parents handle court business. That could mean as little as a one-hour drop-in visit for a parole meeting or all-day child care for a parent with jury duty.

An onsite manager said Warm Welcome sees between 2,300 and 3,000 kids in a year, but did not know where the center will be relocated.

Larimer Associates is best-known for owning and managing Larimer Square. The company also worked on Hangar 2 in Lowry and Union Station downtown. Urban Villages’ portfolio includes the Sugar Cube building downtown and the Vita Flats apartments in Speer.

New wood-frame codes allow for more flexibility – Colorado Real Estate Journal

February 3, 2016 by The Lawson Knowlton Team

Source: New wood-frame codes allow for more flexibility – Colorado Real Estate Journal

From the construction of tenements in the 1800s to the high-rise steel and concrete luxury residential towers built today, for-rent housing has come a long way. But one constant is the use of wood to build rental housing. Over the years, architects and engineers have pushed the limits of what wood can do, and the adoption of the 2015 International Building Code allows this to continue.

Not everyone is happy though. There has been some recent backlash about the number of four- and five-story wood-frame apartments impacting Denver’s downtown. With continued demand for housing, escalating construction prices and the ability to achieve even higher densities under the recent IBC, we don’t anticipate the number of new wood-frame buildings added to the Denver landscape will diminish.

The most significant benefit the new IBC offers wood-frame construction is the ability to design a podium building based on the overall building height. Podium buildings will no longer be restricted to only one level of podium structure below the podium deck.

This gives designers the ability to design a seven-story, midrise building with five levels of wood-frame construction over two levels of concrete podium – all above grade. With this additional above-grade level of concrete, the flexibility and opportunities to increase density, reduce cost or both become possible.

Options include pulling the traditional below-grade level parking out of the ground to save the cost of building subterranean, which is typical in traditional podium designs. Another option would be to leave the subterranean parking, which allows an additional level of residential units within the concrete portion of the structure, thus increasing density. Both options will change how the design world and residential developers look at the potential of a site.

When evaluating an apartment site, a developer typically considers four wood-frame apartment designs: a three-story walk-up; a four-story surface parked building; a wrap – or some call it a “Texas doughnut” – with four or five stories; and a podium with either four stories over one or five stories over one level of podium above grade. When looking at land value and desired density, often it is obvious which of the four design types are economically appropriate for any given site.

Through advancements in wood construction and new codes, we now have additional ways to evaluate a site. For instance, a seven-story, wood-frame, above-grade podium building is now a possibility. This new option could take a site that was not previously feasible and, through either reduced construction cost or increased density, the project becomes viable. This could create opportunities for sites that previously may have required a seven- or eight-story steel or concrete building in order to justify land value. With new codes, that same site can be feasible using a wood-frame building with equal density and a less expensive structural system option than steel or concrete.

KTGY recently received approval to move forward on its first seven-story wood-frame apartment community in Denver. The project, which is located on Speer Boulevard, between 13th and 14th streets, will consist of 322 units in five stories of wood frame construction over two levels of concrete.

Local zoning will continue to be one of the biggest challenges for wood-frame construction. For example, if zoning still limits the building height to five stories, the four-over one podium will continue to be the building of choice. In addition, as some of the new zoning requirements are adopted, the need for steps in the exterior façade, which are easily achieved in a concrete building, become more challenging to achieve in wood construction.

Also there will be the unavoidable learning curve for building and fire departments as they review designs of this nature and start inspections in the field. Pushing the limits and doing things a little differently will not be without bumps in the road, but the wood-frame apartment industry will be much better for it.

As apartment designers, engineers, general contractors and developers, it is important to stay at the forefront of what is new, while continuing to push the limits of design, building systems and processes, striving for better and not just more. The changes that are taking place will not only allow for greater density and lower costs, but also open the door for greater flexibility to enhance the quality of the design and improve the negative image that wood-frame apartment building construction recently received in the Denver metro area.

Featured in CREJ’s Multifamily Properties Quarterly Oct. 21, 2015, issue.

Where have Denver-area rents risen the most? – Denver Business Journal

February 2, 2016 by The Lawson Knowlton Team

Colorado rents rose an average of 6.2 percent last year, and in Denver, they rose 4.6 percent.

Source: Where have Denver-area rents risen the most? – Denver Business Journal

That’s according to San Francisco research company Apartment List, which indicated that Westminster had the highest year-over-year growth of any Colorado city, up 14.5 percent from January 2015. A 2-bedroom in Westminster averages $1,480 while a 1-bedroom goes for $1,160.

Colorado rents rose an average of 6.2 percent last year, and in Denver, they rose 4.6 percent.

Apartment List indicates that Boulder has the highest rents statewide with a two-bedroom median rent of $1,900, and one-bedroom rents there averaged $1,560. Boulder rents increased 2.7 percent in the past year.

Denver has the state’s second-most expensive rents, with an average two-bedroom price of $1,740, and an average one-bedroom price of $1,380.

What Rental Property Investors Can Expect in 2016

February 1, 2016 by The Lawson Knowlton Team

Rental investors will benefit in 2016 as property appreciates, rents rise to record heights and vacancy rates fall.

Source: What Rental Property Investors Can Expect in 2016 – B2R Finance Blog

The 2016 housing market is expected to be a picture of moderate but solid growth, with increasing interest rates a minimal concern. Rental investors will particularly benefit as property appreciates, rents rise to record heights and vacancy rates fall.

The housing market is looking more and more attractive for predictable yields as equities continue on their wild ride. “Extreme volatility in the stock market may drive more investors to invest in relatively stable assets like housing,” said Anthony Cazazian, senior vice president of national sales and business development at B2R Finance. “We’ll continue to see origination volume increase.”

Here are four macro trends generally agreed upon by leading housing authorities to take place in 2016. Taken together, they make a solid case for investing in rental housing.

Rental houses will be in high demand.

According to CoreLogic, more than 1.25 million new households will be formed in 2016 thanks to improvements in the labor market and lower unemployment rates. These new household formations will increase housing demand, specifically in the rental market.

Builders are ramping up construction of apartments, but have been slow to increase construction of new single-family houses, making them in increasingly short supply.

“The problem is that demand for rental units has been outstripping supply, and vacancy rates are now about as low as they have been in 30 years,” said Mark Zandi, chief economist at Moody’s Analytics. “Fueling demand are the millennials who are finally finding jobs and striking out on their own, along with households that have lost their homes in foreclosure, and more empty-nesters looking to downsize and simplify.”

In short, “The biggest risk to the 2016 market will be the continuation of inventory shortage,” warnsRedfin in its housing market predictions.

Which leads us to the resulting number two.

Rents will continue to rise.

One of the biggest hallmarks of 2015 has been the rise in rents across the country, and 2016 is expected to bring more of the same. RealtyTrac found in its 2016 Rental Affordability Analysis that rents on three-bedroom properties will increase an average of 3.5 percent in 2016.

“Renters in 2016 will be caught between a bit of a rock and a hard place, with rents becoming less affordable as they rise faster than wages, but home prices rising even faster than rents,” said Daren Blomquist, vice president at RealtyTrac.

Buying, the study states, is still more affordable than renting in 58 percent of U.S. housing markets despite home price appreciation outpacing rent growth in 55 percent of markets.

Trulia expects this trend to continue. “Although interest rates are sure to rise, we think buying will continue to beat renting,” the housing website said in its predictions for 2016. “Nationally, interest rates would have to rise to about 6.5 percent for the costs of buying to equate renting.”

It’s a profitable market indeed for rental property investors. Concludes Zandi, “To sum up, homeowners, landlords and taxpayers should have a good 2016 … Gauging trends in housing is often an intrepid affair, but these trends seem firmly in place for [2016].”

Interest rates will increase slowly and gradually.

“[T]he consensus view among economists is that economic growth will continue, and the U.S. will enter an eighth consecutive year of expansion in the second half of [2016],” said Frank Nothaft, senior vice president and chief economist at CoreLogic. “Most forecasts place growth at 2 and 3 percent during 2016, creating enough jobs to exert downward pressure on the national unemployment rate.”

With such good news on the economic front, the Federal Reserve is expected to raise short-term interest rates approximately one percentage point over the course of 2016.

Consequentially, “Mortgage rates will tick higher but remain at historically low levels in 2016,” saidSean Becketti, chief economist at Freddie Mac. The GSE giant expects the 30-year fixed-rate mortgage to average below 4.5 percent for 2016 on an annualized basis.

As to cadence, Svenja Gudell, chief economist at Zillow.com, expects the Fed to raise rates four times at 25 basis points each.

The markets are already prepared. Said Matthew Zall, director of capital markets at B2R Finance, “The Fed’s rate hike is already priced into the market, meaning that the mortgage market has already factored an increase into the rates that are now being quoted.”

House sales and prices will continue to grow.

Higher mortgage rates and lower affordability is expected to slow acceleration in existing house sales and prices within the range of 3-5 percent in 2016, according to estimates by Freddie Mac, CoreLogic, Redfin and Realtor.com.

“[2016]’s moderate gains in existing prices and sales, versus the accelerated growth we’ve seen in previous years, indicate that we are entering a normal, but healthy housing market,” said Jonathan Smoke, chief economist at Realtor.com.

Realtor.com has laid out its 2016 forecast for key housing and economic indicators alongside 2015 expected actuals in the chart below. Check it out, and make a cheer to the coming year ahead.

Denver: Expect 4.6% Multifamily Rent Growth For 2016 – Multifamily

January 14, 2016 by The Lawson Knowlton Team

Source: Report: Expect 4.6% Multifamily Rent Growth For 2016 – Multifamily

Yardi Matrix expects 2015’s hot markets to lead a 4.6% jump in apartment rent growth in 2016—down from 6.5% last year, but still killing the 2.8% eight-year average. Denver will lead the charge with a whopping 11.2% rent jump, followed by S.F. (11%) and Portland (9.2%). The Yardi Matrix report says these cities “are home to intellectual hubs led by technology firms” along with a Millennial-friendly lifestyle, CoStar reports. Sacramento and Millennial favorite Austin, TX, fill out the top five in rent growth. Richmond and Twin Cities rents are looking more or less flat; they’re in the bottom three of the top 30 with DC—a 3.7% supply jump in the nation’s capital will slow rents to .8% growth. [GlobeSt]

Top 4 Reasons Why Rent Growth is Booming in Denver | Property Management Insider

July 7, 2015 by The Lawson Knowlton Team

Source: Top 4 Reasons Why Rent Growth is Booming in Denver – MPF Research

Three to five years ago, few would have picked the Denver apartment market to perform as well as it has. But with nation-leading rent growth, strong economic and demographic tailwinds and a structural shift in the single-family market, the Mile High City apartment market is firing on all cylinders. Starting in late 2010, the Denver/Boulder market has been elite in terms of apartment rent growth. And since then, annual rent change has continued strong upward momentum. In fact, Denver led the country in 1st quarter 2015 with a 10.5% year-over-year rent hike, a 20-year high for the metro.

Strong rent growth has come despite decade-high new supply levels. In fact, Class A product, which is vulnerable to competition from new supply, posted same-store rent growth of 9.3% in year-ending 1st quarter 2015. When looking at effective rental rates over the last five years, all property classes posted strong gains, but mid-rise assets led the pack. Average effective rental rates among surveyed mid-rise properties increased 55% since 2010.

Over the past five years, rent change in the Denver area has accelerated at almost twice the pace of the MPF Research top 50 U.S. markets. During that time, average apartment rental rates in Denver/Boulder rose nearly 40%, a top five performance nationally.

1. Denver is a Millennial magnet

Metro Denver continues to rank among the nation’s fastest growing metros, with annual population growth averaging 1.7% over the last 10 years. Driving population growth is the 20- to 34-year-old cohort, critical to the apartment market. As such, Denver has become a Millennial boomtown. In fact, over the last three years, Denver has seen one of the nation’s largest influx of Gen Y’ers. That age segment has grown nearly 11% since 2011, twice the national rate and second fastest among metros, behind Texas’ capitol city Austin.

2. Denver continues to lure college-educated labor force

Additionally, Denver has one of the most educated workforces in the country. In fact, the Mile High City ranks #7 nationally for percentage of adults age 25 and over with a bachelor’s degree. In 2013, the 10 largest colleges and universities in the Denver metro enrolled a total of about 175,000 students. From 2007-2012, the U.S. Census ranked the Denver metro #2 for attracting college age workers. Strong Millennial growth coupled with a deep well of educated workers continues to drive apartment demand in the Denver area.

3. High-paying jobs are driving income growth

Denver has added a large proportion of high-paying jobs, leading to one of the nation’s largest leaps in household incomes. Over the last three years, the Denver area has ranked #3 in terms of median household income growth. One reason is that Denver not only headquarters nine Fortune 500 Companies, but has also become an entrepreneurial hub. According to the Downtown Denver Partnership, there are 370 tech startups in the central business district, accounting for roughly 3,000 jobs and 8% of downtown businesses. In fact, tech innovation was so concentrated here that the U.S. Patent and Trademark Office opened a permanent satellite location in Denver in June 2014, one of only four in the country. Additionally, crude market volatility has caused oil and gas companies to reel in expenses, but energy remains a prominent job segment. Denver is the most populous city within a 500 mile radius, and sits atop the deepest part of the Denver-Julesburg (D-J) basin, making the metro a powerful energy sector hub. The D-J basin is centered on the eastern slope of the Rockies, extending south of Denver and into parts of Wyoming, Nebraska and Kansas. Oil exploration companies looking to hire are more likely to draw from the vast employment pool in Denver than from a smaller city in the D-J basin. Altogether, the energy sector employs about 50,200 people, according to Metro Denver Economic Development Center, placing Denver at the #4 spot nationally for oil and gas employment. Denver is also a hotspot for other industry clusters, including aerospace, aviation, bioscience, broadcasting, financial services and information technology. Additionally, Denver’s central location makes it a business and tourism hub for commerce across the U.S. In 2014, the Denver International Airport supported 53.4 million passengers, the most traffic in the airport’s history. Such a high travel volume brought in about $26 billion in revenue to the Denver region and supports about 35,000 jobs.

4. Denver’s single-family market is thriving

If you work in the real estate industry, it should come as no surprise that the single family segment in Denver is a red-hot seller’s market. After two years of double-digit increases in sales volumes, single-family sales have slowed. And as of May 2015, average single family prices climbed to an all-time high above $420,000, according to the Denver Metro Association of Realtors (DMAR). But the slowdown in sales volumes is limited to homes priced below $300,000, due to extremely low inventory. Furthermore, sellers have been capturing more than 100% of the listing price, putting buyers in a bidding war, according to DMAR. Housing stock is hitting long-term shortages with about 1.3 months of supply most recently, compared to 5.3 months nationally. Low housing inventory has plagued the Denver area for some time as developers gravitate toward pricier middle-market or luxury homes. In fact, current single-family permit volume is just 60% of the long-term average. Additionally, lack of labor has pushed up costs for builders, as many skilled construction workers and subcontractors have found a new place Colorado’s booming oil industry. Builders have also cited a lack of available land. Meanwhile, the little supply that is available is being gobbled up quickly. John Burns Real Estate Consulting found that many developers in Denver hit 70% to 90% of their annual sales goals by April 2015, while nationally builders are at 43%. Finally, Denver home prices did not overheat prior to the recession like many of the other markets as evidenced by the Case-Shiller index. In fact, if we indexed the MPF Research top 50 markets to 2007 price levels, Denver’s home appreciation has outperformed every market other than Houston and Austin. Housing demand is fierce in Denver, and accelerating single-family values are pricing would-be home buyers out of purchasing and into the rental segment.

Conclusion

Denver continues to have elite rent growth with near-universal strength across market segments, and has sustained that momentum for nearly five years. Denver continues to attract young talent, growing the primary renter demographic population. Solid employment growth continues to boost incomes, particularly in the energy and tech services sectors. The strong economic and demographic tailwinds have driven demand for housing in the Mile High City metro. For the apartment market, demand continues to come in above long-term averages, blunting the usual adverse effects of decade-high new supply levels. Finally, while the swell of single-family prices is a good indicator for the Denver economy, it’s also a good sign for apartment operators as extremely low supply and soaring prices will likely stem the loss of renters to home purchase.