Multifamily Construction on the Upswing in Denver Area

The march out of dormancy for multifamily construction continues in the Denver area, with three new projects either started or about to begin.

By Dennis Huspensi – Denver Business Journal

The march out of dormancy for multifamily construction continues in the Denver area, with three new projects either started or about to begin.

“We’ve been waiting for the right time,” said Peter Culshaw, executive vice president for Shea Properties Colorado. “Our intention is to do this in quite a big way.”

Shea recently broke ground on the Caché Luxury Apartments, off Lincoln Avenue near the Meridian business park in Lone Tree. The 288-unit complex is expected to be completed in 2012, with leasing beginning in the spring.”

“Caché is the first of what could be multiple projects in the next couple of years,” Culshaw said of the $25 million complex. “The market is very tight right now.”

Tight is right. Statistics from Apartment Appraisers and Consultants’s (AAC) third-quarter report, Apartment Insights, show the vacancy rate dropped to 4.91 percent, with gross rent rates climbing 5.3 percent to $900 per month, and the effective (or net) rent rate growing 7.6 percent to $895.

“Those are strong numbers, of course,” said Cary Bruteig, president. “The apartment market is strengthening every quarter.” Couple that trend with lower construction costs and more conventional lenders approving loans for multifamily projects, and Denver appears primed for a resurgence in new multifamily growth.

AAC is tracking 18 projects under construction, bringing 3,100 units to the market in the next year or so. Bruteig expects 1,700 units to be brought online before year-end, with another 2,000 anticipated for 2012.

That’s nowhere near the 3,000 to 4,000 units of new construction that were being built during boom years, but positive growth nonetheless, Bruteig said.

“The apartment market looks like it’s undersupplied for apartments at least through 2012, with absorption happening faster than building at least through 2013 or 2014,” he said.

Also, two affordable-rate apartment buildings are going up. Wazee Partners LLC will break ground on the 88-unit Wheat Ridge Town Center Senior Residences by Oct. 24, and the 92-unit Bluff Lake Apartments in Denver’s Stapleton neighborhood is under construction.

The Denver office of Catamount Constructors Inc. Catamount Constructors Inc. Latest from The Business Journals Chamber seeking nominations for 2011 awardsDenver firm looks to build its presence in San AntonioCDC slashes size of 0M campus expansion Follow this company is building those two projects as well as the Caché apartments.

“This is the first new development we’ve done in Denver,” said Tyler Downs, a Wazee principal. “Normally, we do acquisition and renovation projects.”

Downs said the Internal Revenue Code Section 42 low-income housing tax credits have allowed affordable-housing projects to continue, even through the downturn.

“It’s always a good thing to develop affordable housing,” Downs said. “Generally, it’s a really good thing for the community and financeable.”

The senior residences, off 44th Avenue and Upham Street, are scheduled to be completed in August.

Lower Costs Let Mercy Housing do More

Mercy Housing, with its national headquarters in Denver, is building the $10 million Bluff Lake complex, off east 31st Avenue and Hanover Street, for low-income families and those moving out of homelessness.

Mercy’s Jennifer Erixon senior vice president, said construction costs remain deflated, so planners were able to build some sustainability elements into the design with the money saved.

Forest City, as part of its development agreement, donated the land. Denver’s Road Home initiative to end homelessness helped with funding.

“We absolutely find that housing for low-income families is always in demand, but now it’s stronger than ever,” Erixon said. “In many places in the city, there’s a multiyear waiting list. Families we serve were hurting long before the recession, and they’re finding themselves in an even more precarious housing situation now.”

But the need for market-rate apartments also is apparent and looks to continue in the near future, Shea’s Culshaw said. “The swing from home ownership to rentals is in full swing, and we want to take advantage of that,” he said.

Shea has been hanging on to its land, as opposed to selling it to a competing developer, in anticipation of the market improving here.

“Construction pricing is favorable right now, and a lot is aligned, so hopefully we’ll have a good run here,” Culshaw said, noting Shea has another project in the final planning stages for a 200-unit complex in Highlands Ranch, near Lucent Boulevard, and a downtown site at 15th and Curtis streets not far behind.

The south area near the Denver Tech Center, with the “massive employment base” and strong retail presence with Park Meadows, is primed for more rental units, he said.

The only new multifamily construction in that area has been Houston-based Martin Fein Interests Luxury high-rise apartments planned inside the LoopFein buys Inner Loop site for rental projectsSawyer Heights Village sells for M Follow this company Ltd.’s new 243-unit luxury complex, the Miramont at RidgeGate, which opened in Lone Tree last year.

“I think in 2012 and 2013, we’re going to see a lot of new construction as these deals get finalized, the financing gets approved and groundbreaking begins,” Downs said. “Over the last three to five months, we’re starting to see more conventional lenders re-enter the renter marketplace, especially the pension funds, life insurance companies and regional banks. They’ve been on the sidelines the last couple of years but are starting to re-emerge.”

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