Denver Multifamily Market Fundamentals Improve, but Sales Activity Remains Limited
Northmarq has just released its Denver Q1 2023 Market Insights which includes market data, charts and graphs on current and historical trends for multifamily, employment, development, vacancy, rents and multifamily sales.
- Multifamily property performance metrics strengthened during the first quarter. The year ahead will be an active one for new development with more than 43,700 units currently under construction.
- Fueled by healthy absorption levels, area vacancy improved slightly in recent months — dipping 10 basis points during the first quarter to 5.5%. Year over year, the rate increased by 80 basis points.
- Asking rents inched higher to start the year, rising 0.4% in the first quarter to $1,872 per month. Despite some quarterly volatility, rents have advanced 4.7% during the past 12 months.
- Multifamily transaction activity continued to taper off, as sales volume in the first quarter dropped more than 25% from the previous period. The median sales price through the first three months of 2023 was $323,100 per unit, up 8% from the median price last year.
The Denver multifamily market improved at the start of the year, as the local vacancy rate inched lower, and area rents ticked higher. Absorption began 2023 ahead of the pace established in prior years, and this renter demand will be a welcome sign as the pace of supply growth accelerates. Developers remain active throughout the region with more than 43,700 units currently underway. Construction activity is concentrated in the city center, as roughly 17 percent of the development pipeline is located in the Central Business District submarket.
After the multifamily investment market cooled in the final months of 2022, sales activity in Denver recorded additional slowing at the start of this year. The number of deals in the first three months of 2023 fell 60 percent from levels at the start of last year. Despite limited sales volume, transaction pricing remains strong. The median sales price to this point in 2023 is $323,100 per unit, nearly an 8 percent increase from the median price in 2022. One reason for the elevated pricing levels has been the number of newer assets that have changed hands to this point in 2023. Approximately half of the transactions that closed in the first quarter involved properties that were delivered in 2020 or later.
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