Demand for Rental Apartments hits 5-Yr High Across The Country

As the national economy hit a milestone today having achieved the longest expansion on record news comes out that demand for rental apartments nationally has hit a 5-yr high. While this may all seem to be positive news I remain skeptical.

According to The Wall Street Journal the number of move-ins during the second quarter shot up 11 percent compared to last year citing data from RealPage. That surge caused the national occupancy rate to hit 95.8 percent, according to the report.

In Chicago and Houston, demand grew particularly strongly, as move-ins outpaced new construction by an almost 3 to 1. Smaller metro areas witnessed big rental price increases as well, including Wilmington, N.C., where rents jumped by 7.4 percent, and Huntsville, Ala., where they rose by 6.4 percent.

Yet there are some disconnects in the marketplace. While apartment construction is nearing a 30-year high most of the products coming on line are for higher-income earners (those most capable of purchasing a home), leaving the market for affordable rentals significantly challenged. We have witnessed this phenomenon in Denver over the last 5 years where prior to the expansion Denver was considered an affordable place to reside.

Also some pundits suggest the demand for rentals is in part due to the over-priced housing markets in many cities coupled with continued low-inventory.

I see a few different versions of the statistics having been in the real estate market for more than two decades:

• Housing purchases are strong when there is a collective feeling that the marketplace is stable or expanding as traditionally housing costs have kept up and usually exceeded inflation making one’s residence a wealth builder. Are people renting due to lack of for sale housing inventory? Or due to uncertainty about where housing prices go from here?

 

• When monthly rental expenditures exceed those of a mortgage for-sale housing usually receives a boost as a mortgage allows one to purchase with leverage and take advantage of various attributes of home ownership including building of equity, tax deductions and potentially additional leverage i.e. HELOC versus a rental which offers none of those attributes.

 

• While driving around the most in-demand neighborhoods in Denver the new apartment buildings are all around from Cherry Creek to Country Club Towers, the former CU Health Sciences Center to Golden Triangle/Speer Boulevard corridor. However many of those buildings are now offering incentives to entice leasing activity usually in for form of a month-free or other compensation.

I honestly do not know what to make of the market conditions. While are equity markets continue to make new highs it seems C-Level executives are sounding cautious and already raising concerns about future earnings.

If our economy is so strong why have interest rates not risen? Historically low interest rates are an indicator of a sluggish economy in need to stimulation.

With mortgage rates still below 5% why is there not even higher demand for housing purchases or have housing prices so severely exceeded income levels that only those down-sizing or moving from a more expensive locale can afford to buy.

While I do not consider myself a pessimist, I too am sitting on the sidelines ensconced in a rental for the immediate future as inventory remains strained, prices to me see high i.e. I do not believe there will be appreciable equity growth in the next 3-5 years and the monies we have allocated for a future home seems to be doing better in the equity market versus the housing market…..only time will tell.

 

 

 

 

The Three Condo Buildings That Set the Foundation for The Golden Triangle

For many years the neighborhood known as The Golden Triangle (area south of The Denver Art Museum) mystified urban planners and developers. Located south of downtown the area was a mix of low-rise dated commercial buildings and parking lots that by virtue of location should have always been in demand.

During the last 1990’s into the 2000’s a period similar to the boom at present three (3) high-rises were developed setting the foundation for the neighborhood and its resurgence. Of the three buildings, two centrally located in the neighborhood, a third on its eastern flank. The buildings were conceived and developed by Craig Nassi.

At present the area continues to surge with redevelopment including rental apartments along its Speer Boulevard border, in-fill row houses within the heart of the neighborhood i.e. between Broadway and Speer, south of 12^thAvenue and continued activity on the Broadway corridor.

Of the three buildings, which changed the skyline of the neighborhood The Belvedere at 475 W 12th Avenue, was the first to be completed and offered for sale. Conceived and designed based on the aesthetic of elegant pre-war co-ops of Manhattan the finished building includes an opulent lobby, an attended door and exterior design details reminiscent of pre-WWII apartment houses. The Belvedere was consider out of place in the Rocky Mountain West (to date most condo buildings has been developed with a contemporary design) and was followed by The Prado, within one block sharing similar aesthetics and The Beauvallon, a hulking structure built on Lincoln Street with full amenities offering views of Downtown and The Front Range.

Having recently represented a seller in The Belvedere, a sale which commanded the highest per square foot transacted in the building to date I wished to look back on the market over the last year for all three buildings. Due to their design and location, the three buildings are truly unique and have yet to be replicated.

The Belvedere 475 W 12^thAvenue (1999)

• Closed Sales: Seven (7)
• Size: 900 SF to 2,640 SF
• Sold: $350,000 – $985,000
• Average PSF: $385.95*
• On Sale or Under Contract: Two (2) Avg. $411 PSF
• *The transaction in which I represented the seller closed at $415 PSF

The Prado: 300 W 11^thAvenue (2001)

• Closed Sales: Six (6)
• Size: 1,008 SF to 2,096 SF
• Sold: $375,000 – $900,000
• Average PSF: $380.32
• On Sale of Under Contract: Two (4) Avg Asking $403 PSF
• Of note, two parking spaces for sale asking $60,000 not included in stats above

The Beauvallon 925 Lincoln St (2001)

• Closed Sales: Nine (9)
• Size: 769 SF to 2,272 SF
• Sold: $315,000 – $730,000
• Average PSF: $374.24.95
• On Sale of Under Contract: Seven (7) Avg Asking $380 PSF

Please note while the buildings were developed one person, each is unique concerning setting, amenities, views and floor plans. Yet even in the present day in which we are witnessing glass enclosed high-rises penetrating the skyline from Downtown to Cherry Creek, The Belevedere, The Prado and The Beauvallon continue to occupy a unique niche in the marketplace concerning location, design and views and doubtful to be replicated anytime soon. While one rarely uses the term “bespoke” concerning condos, these three buildings fit the definition.

And in the interest of a fair and balanced blog I would be remiss if I did not include the opposing opinion concerning the design of the The Beauvillon as noted in the following article from Westword titled: The Ten Worst 21st-Century Buildings in Downtown Denver.

Most Expensive Rentals in Denver

Well, its semi-official, downtown adjacent Golden Triangle neighborhood is the most expensive neighborhood on average for a one-bedroom rental with a median (half were higher, half were lower) of $2,275/month in October 2015 according to San Francisco based Zumper, an apartment rental search and application app.

What is interesting is this is a neighborhood which has transformed immensely over the past two decades. While always home to the Denver Art Museum on the south-side of Civic Center (and of course the Burnham Hoyt/Michael Graves Denver Public Library), the area boomed when luxury condos were built between Lincoln Street and Speer Boulevard from 7th Avenue to 14th Avenue. In addition, the area welcomes the Clyfford Still Museum, a few unique mixed use projects and of course a central location.

Yet historically the mid-rises east of Lincoln Street have historically offered affordable rentals north and west of the Governors Park neighborhood  as well as across Cherry Creek at Parkway Center.

If you have driven northbound on Speer Boulevard you will see new luxury rentals sprouting up along this historic street. At the intersection of 6th/Speer what was once a large gas station has given way to a mid-rise new development as has a lot to the northwest beyond Broadway.

For additional details, here is a link to the article in the Denver Business Journal