Denver’s strong apartment performance is bucking the national trend. Will that continue amid economic headwinds? Victor Calanog, Ph.D., Commercial Real Estate Economist, shares his take, leveraging data from Moody's Analytics CRE.
Denver outperforms national multifamily trends
Asking and effective rents for Denver apartments rose 0.6% and 0.2%, respectively, in Q1 2023, while vacancy rates fell 30 basis points to 5.4%. While that rent growth represents a slowdown relative to extremely robust numbers from 2021 and 2022, Denver is absolutely bucking the overall national trend, Calanog says.
New construction, potential recession a risky combo
There is some cause for concern. First, the probability of a national recession remains very high. Second, for Denver specifically, we’re looking at close to 8,500 new apartment units to be delivered this year, according to a Moody’s forecast. That is comparable to supply growth from pre-COVID years. The combination of high supply growth and demand pulling back if we do run into a recession means a real risk for apartment rents and vacancies.
Submarket to watch: Denver-North
With that said, the discussion always needs to be nuanced, and focused on specific neighborhoods. Construction, for example, appears concentrated in the metro, with the Denver-North submarket expected to welcome close to 2,800 units — one-third of the total.
If the U.S. does tip over into a recession, prudent apartment investors need to plan for downsides. But on the upside, the prospects for multifamily as a whole remain pretty healthy over the medium- to long-run. Demographic trends in the U.S. are extremely supportive for the rental housing market.
By the editorial team at Story by J.P. Morgan
What’s the multifamily outlook in other U.S. metro markets? Watch our mid-2023 analyses for more cities across the country.
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