As residents and visitors to the Mile High City may have noticed, there’s significant multifamily residential construction underway in the Downtown Denver area. Back in April, I observed that Denver was on the cusp of another Downtown housing boom and, indeed, there is no longer any doubt that Denver is experiencing a major multifamily housing expansion in its urban core.
Downtown Denver’s construction boom from the 2000s never really came to an end with the 2008-2010 recession; it just shifted gears. Pre-recession, Downtown Denver experienced a diverse mix of development: numerous condominium and apartment projects and various cultural, office, and hotel developments. When the recession hit, Denver had (as it usually does) a queue of civic projects ready to begin construction (Denver Union Station, Ralph Carr Colorado Judicial Center, History Colorado Center, Clyfford Still Museum, Denver bond projects), which kept Downtown’s construction scene lively despite the private-sector’s woes. Now, with those civic projects wrapping up, the improving economy and apparent demographic shifts are fueling the next wave of Downtown Denver development: for-rent multifamily residential.
Let’s put Downtown Denver’s present housing boom in some recent historical context: There were approximately 10,500 residential units (both for-sale and for-rent—but mostly for-sale) that were built during the 2000-2009 decade within Denver’s center city districts. Downtown Denver’s current housing boom, which gained momentum in the second half of 2011 and really took off in 2012, has over 3,800 units currently under construction/recently completed within just a 1.5-mile radius of Downtown Denver. This represents nearly 40% the total number of housing units completed during the entire 2000s decade, in just 20% the time. Let’s take a look at Downtown Denver’s current housing boom (click to embiggen or, if you prefer, click here to download a PDF of this image):
Please note that there are a handful of projects on this map that I haven’t yet gotten around to covering on this blog (stay tuned… working on it!); a few projects that you may have heard rumors about but are not on the map because I consider them at the moment to be too uncertain/speculative; a few projects not on the map due to the small number of units; and perhaps a few projects not on the map that I just simply missed. Nevertheless, this gives you a pretty good idea of what’s going on in the Downtown Denver area. Also, please remember that this map covers only multifamily residential projects, so office and hotel developments are not included. Anyway, let’s break this down by project status:
Next, there are the 3,200-plus residential units currently proposed for the Downtown Denver area. Of those, I believe about half them will begin construction within the next six months. If so, that means Denver will add approximately 5,000 residential units to its Downtown area from mid-2012 to mid-2014, or roughly half its total from the entire 2000s decade.
Is that too many residential units in too short of a time period for Downtown Denver?
The Denver metro apartment vacancy rate is currently at a 12-year low. Virtually no new multifamily residential units were added to the market during the economic downturn. Denver led the nation during the recession as the most popular relocation destination for young adults. And, there’s substantial evidence of a growing trend—a cultural shift, actually—for people wanting to live and work in urban areas. So, to answer the question I posed above: Is that too many residential units in too short of a time period? No, I do not think we are currently over-building multifamily residential in Downtown Denver. However, if developers were to continue to propose new for-rent multifamily residential projects in 2013 at the same rate we’ve seen them propose new projects during 2012 then, yes, I believe it would behoove Denver to slow things down a bit, absent some other market factor (i.e. a major spike in job growth) that would justify continuing apartment development at such a vigorous rate.
Fortunately, we’re already seeing a reduction in the frequency of new project announcements. Most of the developments listed under the “Proposed” section in the table above have been around since earlier this year, and not many new projects have been announced within the past month or two. This is a good thing, and hopefully a sign that developers are sensing that we’re at a “wait-and-see” moment in the market.
Another factor to consider is the re-emergence of Downtown Denver’s condominium market. About 99% of the units itemized in the table above are for-rent units. However, with home sales in the metro Denver area improving at a dramatic rate, it is plausible to envision a time in the not-too-distant future when developers will restart Downtown Denver’s condo market. They will probably begin with smaller, lower-risk projects (row houses and boutique flats), but the timing may work out just right: as the Downtown Denver rental market softens, the Downtown Denver condo market takes off.
Regardless of what the market may be like during the rest of the 2010s decade, the current investments taking place in Downtown Denver as a major, mainstream residential market is profound, and is likely to propel Downtown Denver over the tipping-point of becoming America’s next “don’t-need-a-car, live-work-play-shop” market in its own right.