MARKET SNAPSHOT: Strong Employment Boosts Demand in Denver, Sending Construction to Nine-Year High
By Philip Shea, Associate Editor
The Denver metro area continues to outpace the rest of the nation in job growth, with employment rising 2.3 percent in the first half of 2012 alone. In keeping with the positive trends, construction for multifamily projects is expanding at one of the fastest rates in the country, with over 3,000 units expected to be completed by the end of the year.
According to Marcus & Millichap, the strongest job growth occurred in 2012 has occurred in the trade, transportation and utilities sectors, with more than 6,500 new positions created due to an upswing in retail hiring. Sectors like education, health services and construction followed with the addition of more than 5,600 new jobs.
Such factors have contributed to increased occupancy metrowide. However, due to the tremendous amount of new construction, vacancy rates are expected to be maintained at just above 5 percent through the end of the year. While rates across the United States are expected to drop just below 4 percent in 2012, vacancy in Denver remains at 5.1 percent and may even rise to 5.2 percent by year’s end.
Yet as long as occupancy does not begin a downward trend, rents are expected to continue to increase across the metro. Marcus & Millichap reports that the average asking rent rose 1.1 percent in the first half of 2012 to $908 per month, the effective rents rose 1.7 percent. Asking rents should continue to climb to $924 per month by 2013, while effective rents are expected to increase 3.8 percent to $840 per month.
New construction will be most highly concentrated in the downtown and northern submarkets, with 1,300 of the 4,400 new units slated for delivery in 2013 being located in the Denver-North area. 750 units were brought online metrowide in the first half of 2012 alone, this compared to the 838 units completed throughout all of 2011.
The downtown submarket saw the bulk of multifamily growth over the past year, with vacancy falling 180 basis points and average rent coming in at $1,036 per month. The central submarket just outside of downtown, however, saw vacancy rise 90 basis points—with rents there at $909 per month. The Lakewood area will likely see a surge in occupancy as the west-corridor light rail line nears completion, which is scheduled for the spring of 2013.
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