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Downtown Denver Residential Projects: December 2015 Update

It’s time for our six-month update of development activity in the Downtown Denver area, presented in two parts: this post focuses on multifamily residential and the next post will look at non-residential projects. You can read our last multifamily residential update from June 2015 here. As before, this analysis covers the area within a 1.5-mile radius of the D&F clock tower at the corner of 16th and Arapahoe, a suitable reference for the geographic center of the Downtown Denver area. For similar assessments that use a slightly different geographic approach, please review the excellent development summary reports at the Downtown Denver Partnership.

2015-12-28_multifamily-residential-update-d&f-tower

The iconic D&F clock tower at 16th and Arapahoe, March 2009.

From the start of the decade through the end of 2015, a total of 7,749 multifamily residential units have been completed within our 1.5-mile radius survey area, an increase of 1,476 units since our June 2015 report. An additional 5,039 units are currently under construction, about 500 more than the 4,556 units that were in progress six months ago. Another 2,109 units are currently proposed (projects with sufficient available data that have been profiled on DenverInfill) and about 4,000 more units are in the pipeline (i.e., projects at various stages from “rumored” to “under preliminary review with the city”)—slightly higher than the 1,507-proposed/4,000-pipeline units we reported in June. So in other words, it would appear that the Downtown Denver residential boom has slightly expanded in the past six months.

Click on the image below to view in full size our December 2015 Downtown Denver Multifamily Residential Projects exhibit, or use this link (Downtown-Denver-Residential-Projects-Summary-December-2015) to view/download a high-resolution PDF version (6 MB) formatted for printing at 11″ x 17″.

2015-12-28_Downtown-Denver-Residential-Projects-Summary-December-2015

Assuming all of the units currently under construction are completed and, using some educated guesses for the number of units likely to be completed annually barring a major economic downturn, we’re estimating approximately 17,000 units will have been built within the 1.5-mile radius by the time the decade ends in December 2019. By comparison, about 10,500 multi-family residential units were built within a slightly larger area during the Aughts from 2000-2009, according to the original DenverInfill website.

(Please note: we’ve recently stopped tracking new townhome projects because, frankly, there are so many of them going up in the Downtown periphery that it is just too time consuming trying to track and report on all of them. So, while our exhibit above does include a few townhome projects, there are hundreds of townhome units under construction and proposed that are not included in our analysis and won’t be in the future.)

What should we expect for multifamily housing development in Downtown Denver in 2016? Mostly likely, more of the same steady growth we’ve seen since 2012. Some of the factors to consider are job growth, population growth, vacancy rates, and the possible effects of construction defects reform.

Denver’s unemployment rate is currently a very low 3.2% and job growth in 2015 has been robust and stronger than first reported. Downtown Denver has also been very successful in growing companies and luring firms relocating from the suburbs or from out of state. Apartment vacancy rates are starting to rise, and with several thousand new units to be added to Downtown’s apartment inventory in the coming months, the vacancy rate may rise to the point of discouraging new developments from moving forward. However, higher vacancy rates could eventually cause some downward pressure on rents, making urban living a bit more attainable for many who are currently priced out of the Downtown market.

And then there’s population growth. Recently, the Census bureau estimated that Colorado’s population increased by about 101,000 people from July 2014 to July 2015, the largest annual numeric gain since 2001. While July 2015 estimates for counties won’t be available until March 2016, we can look back at last year’s numbers for some insight. The Census Bureau estimated that Colorado’s population increased by over 84,000 from July 2013 to July 2014 and during that same time period Denver County’s population increased by over 15,000—or approximately 18% of the state’s total gain. If we assume Denver again captures 18% of statewide population growth, that would mean an increase of around 18,000 in Denver’s population from 2014-2015 and, using Denver’s persons per household average of 2.27, about 8,000 additional housing units would be needed to accommodate that annual increase. How many of those go to Downtown?

In November, the Denver City Council approved a comprehensive construction defects ordinance in hopes of reducing the legal/financial barriers that have held construction of for-sale condominium developments to virtually zero. No one expects the city’s action to immediately unleash a wave of condo construction, but it certainly could begin to thaw multifamily for-sale housing starts over the next few years. Hopefully, the state legislature will finally take action on this issue in the 2016 session.

Anyway, that’s our six-month overview of Downtown Denver’s housing boom. We’ll do our next update in June 2016. Don’t forget, to learn more about the individual projects listed in the exhibit, check out our DenverInfill Project Map available by clicking on the photo link on the right sidebar.

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12 Comments

  1. Nash says:

    Ken, thanks for your excellent update on Denver’s booming apartment market — and your attention to the need for the legislature to pass a comprehensive construction defects reform bill this year, with the same reform features as the ordinance passed by the City of Denver last month.

    Despite the explosive apartment construction around Downtown, the boom is totally lop-sided, with — as you point out — virtually NO new condo projects, anywhere in Colorado. Ten years ago, when the current construction defects law was passed, 25 percent of all housing starts were condo units — a normal housing market, with a spectrum of new apartments, condos, townhomes and single family homes being built, for all income levels and types of housing seekers. Today, after virtually every condo project built in the last decade has been mired in class action lawsuits, insurance on condo projects has gotten so high that condo construction is completely halted.

    The condo “choice” of most first-time homebuyers and downsizing empty-nesters is simply not available. The “unintended consequence” of this special-interest legislation, drafted by-and-for trial lawyers, is that most Denver newcomers are priced out of the affordable housing market. With no new condos available, apartment rental rates are skyrocketing, and so are prices on single family homes. For the third year running, Denver has the fastest-rising home prices of any major city in the nation.

    So we hope the legislature will finally act to fix the construction defects law this year. And we sincerely hope Governor Hickenlooper with finally lead on this critical issue, which has a bi-partisan majority in both houses, waiting to pass a fair, sensible bill.

    Without action soon, the Millennials will simply stop moving to Denver as their first choice, and opt for places like Austin, instead — where they can afford to buy housing. Right now in Denver, affordable housing is out of reach. It’s a lop-sided housing construction boom, which isn’t good for anybody in the long run.

    Again Ken, thanks for raising the construction defects issue, which you so correctly put in the broader context of the full housing market. Expensive apartments going up everywhere, but affordable new condos, nowhere to be found.

  2. Jeff says:

    There’s actually at least 2 condo projects currently under construction in Vail. Then again, in a market like that, with the price per foot, cash sales etc., they are not as beholden to FHA financing and other mechanism that previously enabled first time homebuyers and young buyers into home purchasing, including 100% LTV, 80-10-10, stated income, etc.

  3. MileHighJoe says:

    With so many villains in the construction defects fight, it’s hard to know who to root for. On the one hand, we have greedy developers who cut corners during construction and force the unexpected repair costs on the condo owners themselves. On the other hand, we have out-of-state trial lawyers who are no better than ambulance chasers.

    In the end, I believe that the condo shortage will evaporate because all these new apartment buildings will convert to condos the moment the laws are changed to favor the developers…..or the statute of limitations runs out, whichever comes first. I expect that the condo conversions will be quick and will swamp the market with condo product.

    • Jeff says:

      It would not be as easy apartments to convert for several reasons:

      1. While it is unique to each project, the nature of the financing would in many cases prohibit it.

      2. the 7 year period would reset upon the building be converted

      3. many of these buildings are predominantly 1 bedroom units and studios only, and were built to maximize rentable square footage. Not that they could not be retrofitted, but it would not be easy in many cases

      I would be surprised to see many, if any, condo conversions, of these large scale buildings (50 units or greater) any time in the near future.

      We might over the next 3-5 years achieve a greater balance of condo starts if certain economic factors continue in Denver’s favor, but no way will the shortage evaporate in short order through conversions.

      • MileHighJoe says:

        It’s interesting to hear your perspective and as a condo owner, I’m happy to know the shortage won’t necessarily evaporate.

  4. D.C. says:

    Thank you for this information. I would love to see a post on what could potentially go in the soon to be closed rail yards near the 10th and Osage light rail stop. It looks like it has some great potential for mixed use development. Plus some hugh break buildings that could be like the Source building on steroids .

  5. […] to one of our favorite local resources, Denver Infill, new apartments are being built all over the place, particularly in Downtown […]

  6. The Dirt says:

    Isn’t there another triangular apartment project going up just north of Lumina? I think it’s at 35th and Kalamath but I don’t see it on the map.

    • Ken Schroeppel says:

      There could be! It’s hard to keep track of everything.

    • Jerry G says:

      There is something going up, although I am assume it has to be an apartment. Looks to be 5 stories(?) and the construction company is M&B Construction Services, Inc. That’s all I have.

  7. Joe Jackson says:

    Thanks for the update Ken. You all do a great job on these. I live in LoHi and construction has been crazy this year down here. Very interested to see what the old United Way building ends up looking. Hope to have the city repave Central St, but that might be a “pipe dream”

  8. […] rates in Denver are sky-high, and the multi-family apartment industry is booming. According to one study, 7,749 multi-family residential units have come online in the downtown area alone since the start […]