Trends and Outlook For Multi-Family Properties in Boulder Country
Residential multi-family properties have become a favorite among investors, making the real estate category one of the most popular in the region. In 2014, Boulder County has continued to see unprecedented activity through new construction as well as existing sales in the multi-family market. So what will the market look like in 2015? I expect to see construction slow down, vacancy rates increase and rents level off. Let’s discuss what factors are driving the market locally.
DEMOGRAPHICS 
A variety of factors contributed to the multi-family Boulder boom. One of them hinges on investors banking on widespread news about shifting views around home ownership. The MacArthur Foundation, for example, found that 57 percent of all Americans believe that renting a home is more appealing than owning. While the generational attitudes towards home ownership may very well be feeding the demand for apartments in Boulder, there are a few more local economic factors to consider. Boulder County has continually been named one of the Top 10 desirable regions in the country to build a business (Businessweek). Couple that with the strong local economy and a high barrier to entry for purchasing a home in Boulder County and the output has been a strong demand for apartments making them a safe investment. Increasingly, housing inventories are tightening and we are seeing a dramatic increase of families migrating to Colorado. For example, between 2000 and 2013, Colorado’s population increased by more than 22 percent, a pace that beat the nation’s rate of growth by 12 percentage points.
ECONOMICS
Real Estate Investment Services (REIS) reported that the Denver Metro multi-family market reached a low vacancy rate of 3.6 percent in 2014, and the Apartment Association of Metro Denver reports that Broomfield and Boulder are at 3.3 percent vacancy. Both measurements compared to other investment classes such as office or industrial property vacancies are currently two to three times higher ranging from 6-9 percent. As the vacancy rate remains low —rents have continued to rise. According to the Apartment Association of Metro Denver, the average rent rose 7.4 percent during 2014. The rental price for the third quarter in Boulder and Broomfield was approximately $1.50 per square foot, with many new projects marketing rents exceeding $2.00/SF. Nationally we see a similar trend. Axiometrics reports that the national annual effective rent growth in November 2014 reached 4.7 percent, the strongest result of the year as well as since the crippling recession of 2008.
So what does this all mean for your Boulder County multi-unit property in 2015?
There continues to be strong interest from investors seeking multi-unit income property. This is in part due to an environment providing a low risk (with unprecedented low vacancy and increasing rents) and in part due to speculation that with a demographic change in attitudes away from home ownership there will continue to be an increase demand for rentals.
Currently there is a gap between supply and demand with the demand for housing outpacing supply. With the number of new units coming online in the next few years as well as the rents for some of these new projects passing $2/SF, one has to wonder if demand for rentals will taper as the cost to own a home becomes as affordable or in some instance more affordable than renting. Consider this, a one bedroom 600 SF apartment in Boulder will cost as much as $1,200/month where-as that same monthly payment could afford someone to purchase a $250-275,000 home or condo.
In 2015, I believe we will see an increase in multi-family sale transactions as the conditions are prime to consider selling and the demand from investors continues. Vacancies will likely increase as new projects providing amenities like clubhouses, workout facilities and pools compete with older properties absent of such amenities. Rents will level off as renters will have more options to consider. All in all 2015 will be another exciting year for the multi-family market.
NOTABLE TRANSACTIONS
Todd Walsh and The Colorado Group completed the following multi-unit transactions in 2014.
- 3130 Folsom a duplex was under contract in 4 days and sold at asking price of $525,000 in 38 days.
- A twelve-unit property at 298 Arapahoe sold for $1,850,000 or $50,000 over asking and closed after 52 days of being on the market.
- A six-unit residential property located at 700 30th Street listed for $1,017,000 and sold after only 47 days on the market for $1,004,953 (99% of asking).
- 945 & 985 30th Street two four-unit residential buildings listed for a combined $1,377,000 sold at just over 100% of asking both closing with 47 days of coming to market.
- 1528 Mapleton a 3 unit property was under contract in a single day and sold for $1,200,000 ($100,000 over asking price).
Top 5 largest apartment sales in Boulder County
- Two Nine North, 1925 30th St., Boulder, $93.5 million
- Wyndham Apartments, 2540 Sunset Drive, Longmont, $51 million
- The Boulders, 2850 Kalmia Ave., Boulder, $44.2 million
- Balfour, 1331 Hecla Drive, Louisville, $40.25 million
- Strathmore Park Apartments, 440 Strathmore Lane, Lafayette, $39.9 million
New multi-family housing projects include:
- 98-apartment complex at Violet and Broadway will be completed in June.
- Boulder View Apartments will have 68 apartments
- Gunbarrel Center will have 251 apartments
- Apex 5510 will have 231 new apartments
By Todd Walsh, CCIM
