In the Mile High City, residential building continues to hit new peaks, with high annual job growth and a low unemployment rate. Several multifamily builders have continued to focus on the area’s urban core, while others have spread to a handful of suburban locations.
Denver-based employers have added an estimated 29,200 jobs over the last year ending in September, down from 36,600 the previous year, for a 1.7% annual growth rate, according to Metrostudy. But although the job growth has slowed compared with a few years ago, announcements for business relocations and expansions, including retail giant Amazon’s announcement to expand its Denver Tech Hub with a new office downtown, continue at a steady pace. As a result, the city’s job base remains strong across sectors, especially in technology, finance, manufacturing, and energy, and the unemployment rate remains low at 2.6%, down from 3.3% in August 2018.
“With a steady, healthy local economy, low interest rates, tight resale inventory, and new communities opening up, new-home sales contracts are starting to pick up again after last year’s slowdown,” says John Covert, Metrostudy senior regional director, in Denver’s Q3 2019 executive summary. “But, of the Q3 2019 starts and closings, the only product type to experience gains over the year are condominiums.”
Condo starts for the quarter, and annually, are at their highest levels since 2007. Since the recession, condo activity has been fairly dormant, aside from an occasional small, infill project, continues Covert. Now, condo activity has picked up with third quarter starts listed at 517, a 324% change from 122 in Q3 2018. Annual starts were listed at 1,337, a 35% change from Q3 2018’s 993.
Apartment completions in Denver have also hit recent highs, and over 14,000 units are currently under construction. According to data from RealPage’s Q3 2019 report, the urban core led metro building activity through the cycle. The Downtown/Highlands/Lincoln Park submarket leads with 3,129 units under construction, or a 22.2% share, and the Five Points/Capitol Hill/Cherry Creek submarket follows with 3,104 units and a 22% share.
Denver rents are up 56.8% since early 2010, according to RealPage Q3 data. Today’s typical monthly rent price in the metro is $1,542, up only $126 from the U.S. average of $1,416. In the coming years, analysts expect a 2.2% average annual rent growth with 94.5% occupancy.
Covert also says it’s worth noting that some of the demand for housing has been pushing north into the southwest Weld County submarket. Although the county isn’t technically considered part of the Denver metro area, the tritown area of Frederick/Firestone/Dacono is being strongly influenced by Boulder and Denver.
“Looking forward, we think 2020 is going to be a strong year,” says Joe Hemmelgarn, senior consultant at Metrostudy. “Now, our caveat is the elections. We just don’t know what affect the political environment will have, but I think if we weather that, it will be a good year for building.”
