Aurora Submarket Denver MSA First Half 2019

Submarket Highlights

Large rent gap entices renters to more affordable units in Aurora. The Aurora submarket borders the city of Denver to the east and encompasses large portions of the city of Aurora and surrounding residential communities. The submarket has grown with the metro over the past several years. The Denver market continues to attract new businesses and younger residents, lifting the metro’s median home price faster than the U.S. rate.

The ever-rising home prices, and the high cost to rent in the Denver city center, have pushed many renters to pursue the more affordable options in the Aurora submarket. Within the submarket, recent metro transportation work, including enhancing the Colfax corridor, has helped make the area more appealing to a larger group of potential residents. Colfax Avenue is one of the oldest thoroughfares through Denver. Once known for attracting undesirable establishments, it now attracts more high-income renters as it has transitioned with the placement of Colfax Station servicing the Denver Light Rail. Although rental construction will remain elevated for the third straight year, apartment vacancy will continue to decline, allowing market rents to rise another year.

Aurora’s low cost per unit draws investors looking to capitalize on rental demand. Older Class C properties are attracting investors to Aurora, specifically along East Colfax Avenue. Here, strong market fundamentals show signs of continued rental growth and many investors are looking to capitalize on the rent gap from downtown Denver to Aurora. Due to its upside potential, the submarket provides buyers affordable entry-level opportunities, with units selling on average for $112,000 in 2018. First-year returns in the area are higher than many other submarkets in Denver, ranging in the low-6 percent range. Sellers are motivated in large part by the opportunity to exchange asset equity gained since the 2010 trough into larger properties within Denver. Investors are also exploring the large amount of developable land in the southeastern portion of the submarket where apartment construction has been focused the past year. 

Market Vital Statistics

Construction Trends

• Construction over the past two years has added approximately 1,300 apartments to the Aurora submarket. In 2018, there were two large projects delivered in Aurora: Parq at Iliff Station, located in the southwest area just east of I-225, and Ridge at Wheatlands.

• The bulk of the additions in 2019 are from Forum Fitzsimons, a new development near I-225 and East Colfax Avenue with 424 apartments. One project with a 2020 scheduled completion date is north of Colfax at the former Fitzsimons Army Medical Center. It will have 253 apartments.

• Outlook: This year, 677 units are scheduled to be completed, lifting the Aurora submarket’s multifamily inventory 2.6 percent. Overall, this area contains nearly 20 percent of the total units in the Denver metro.

Rent and Vacancy Trends

• Vacancy decreased 10 basis points last year as the submarket managed to absorb the year’s highest level of completions since 2009.

• Apartments in Aurora are leasing for $1,281 per month, 12 percent below the Denver metro average. Rents are up almost 40 percent since 2013 as the area received an influx of new demand generated by the Denver Light Rail Network, which connects the downtown district to its surrounding communities.

• Outlook: In 2019, Aurora’s vacancy will remain at 4.9 percent as supply matches area demand. Rates will rise 3 percent this year, bringing the average effective rent to $1,320 per month.

Sales Trends

• Deal flow increased in 2018 with investors focusing on Class C apartment buildings along East Colfax, west of Interstate 225. Here, properties have a lower entry-level price at an average of $112,000 per unit.

• The highest initial returns are also in the same area. Cap rates on these buildings averaged 6.3 percent in 2018. Overall, multifamily properties in Aurora provided initial returns of 5.9 percent on average.

• Outlook: Low vacancy rates and improving transportation options to downtown Denver will continue to drive strong investor demand for rental properties in Aurora. Older buildings here provide investors with cash flow and future value-add opportunities through either renovations or redevelopment.

*2019 Forecast

Prepared and edited by Jonathan Ferrendelli, Research Associate

Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; RealPage, Inc.

The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.