Multifamily Investment Forecast 2023

Denver Metro Passing Through an Inflection Point; Return to Urban Core Lifestyles Sparks Investment

Heightened construction persists as performance eases throughout the metro. Like much of the country, apartment availability in the Denver metro tightened significantly in early 2022, with both downtown and suburban vacancies falling to their lowest points since pre-2000. The market now faces a historic number of upcoming completions at a time when apartment absorption is cooling. Anticipated net in-migration for 2023 will fall below 20,000 people for a fourth consecutive year, partially attributed to the slowdown in hiring and recruitment efforts. These factors will weigh on market fundamentals in 2023, with the metro’s average effective rent expected to rise at a muted pace relative to the robust gains in recent years. The supply surge of Class A units amid slow lease-up could spark higher concessions for the year. Lower-tier suburban apartment performance, however, should be less impaired, as demand for budget-friendly housing options subsists in a period of ongoing headwinds.

Investors favoring value-add assets in historic neighborhoods. National economic uncertainty continues to raise questions surrounding preferred investment opportunities. In the Mile High City, central historical neighborhoods have become a buyer favorite. Deal flow in downtown continues to account for the most activity among Denver submarkets, at roughly one-quarter of all transactions last year. Of these trades in the urban core, property exchanges near Capitol Hill have gained momentum, due to strong yields and lower entry costs. These assets can offer first-year returns in excess of 5 percent, often trading with sub-$5 million price tags. Properties here are predominantly early 20th century builds featuring vintage architecture to match their historic cultural surroundings, showing strong value-add potential for investors seeking options in popular residential areas. Remaining below the downtown average, assets here are offering lower entry costs for private buyers in a slowing institutional investor landscape.

Denver Office:

Adam Lewis Vice President, Regional Manager

Tel: (303) 328-2000 | adam.lewis@marcusmillichap.com

Prepared and Edited By:

Benjamin Kunde Research Analyst | Research Services

For Information on national multifamily trends, contact:

John Chang Senior Vice President, National Director | Research Services

Tel: (602) 707-9700 | john.chang@marcusmillichap.com

The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no representation, warranty or guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. Note: Metro-level employment growth is calculated based on the last month of the quarter/year. Sales data includes transactions sold for $1 million or greater unless otherwise noted. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice. Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Real Capital Analytics; RealPage, Inc. © Marcus & Millichap 2021 | www.MarcusMillichap.com