Developers keen on metro area
Denver remains a hot spot for rental growth
Rents in Denver have fallen during the pandemic, according to a recent market report, but that doesn’t mean apartment developers are any less keen on a city that was a hot spot for rent growth before COVID-19 came calling.
In fact, the number of would-be apartments in the planning pipeline for the metro area hit a record 46,000 in December, according to Denver data firm Apartment Insights.
The X Company, the Chicago-based developer behind the X Denver apartment tower that is inching toward completion after nearly three years of construction just north of Coors Field at 3100 Inca St., embodies that enthusiasm for the Mile High City even in the face of shifting consumer preferences.
X Denver offers traditional studio and one-bedroom apartments inside its 12-story, 455-apartment frame, but the X Company also allows people to rent individual bedrooms with private bathrooms in two-, three- and four-bedroom “co-living” apartments with shared kitchens and common areas. Tenants can bring in roommates or just rent a room and let fate decide who will be splitting a fridge with them.
The cheapest option at X Denver will be a room in a two-bedroom co-living apartment; just $985 a month when the first phase of the building opens in April, according to the building’s website.
Of course, when COVID-19 started spreading in Colorado last March it added a new calculus to living in large apartment buildings with hundreds of other people, let alone in a building literally built around the idea of shared space.
Mckenna Solomon, 25, moved in Januar y from a one-bedroom apartment in Denver’s Berkeley neighborhood into a two-bedroom in Chaffee Park that she shares with her partner.
“There are definitely fewer shared spaces now that we’re in this condo. That was definitely a contributing factor,” Solomon said. “I didn’t want to pass 20 or 30 people in a hallway.”
X Company CEO Noah Gottlieb is not sweating the pandemic, at least not publicly. Gottlieb said he and his partners reject
“short-term decision making” and are confident they are offering something that will be successful in Denver.
How confident? X Denver’s sister project, a 22story, 410-apartment building which Gottlieb calls “XD2” is already under way at 21st and Arapahoe Streets, breaking ground late last year. The company is under contract on a third property near Welton and 20th streets.
Gottlieb didn’t provide hard numbers but said preleasing at X Denver is going better than the company hoped.
“We’re having to increase our (leasing) staff because the amount of queries we’re getting is more than we anticipated. And we were optimistic to start,” Gottlieb said.
X Denver was originally planned to welcome its first tenants last week but those move-ins have been delayed until at least April now because of construction delays unrelated to the pandemic, X Company partner Andrew Kerr said a tour last week.
Work on the project was frozen on Friday when a city building official determined an employee was living in one of the units before the building had passed inspections and earned a permanent certificate of occupancy, Denver planning department staff said last week. That led to a temporar y hold being put on general contractor Arco/murray’s license until the employee moved out of the building and the Arco/murray representatives could meet with city officials.
The issue was resolved on Monday morning, city officials said.
X Denver appears to be on track to catch the rental market on its way back up.
Apartment List found that rents in Denver proper rose close to 1% in February. But the city’s median rents are down more than 5% since last Februar y, hitting $1,263 a month for a one-bedroom unit and $1,548 for a two-bedroom last month.
Other major cities have seen more severe declines. San Francisco, New York and Seattle all saw rents drop by 20% or more in February, according to sur vey results. But Denver’s decline is still significant, Apartment List researcher Rob Warnock said.
Much of the renter migration seen during the pandemic has been spurred by economic concerns, Warnock said. People are seeking more affordable housing during lean economic times. But another driving force in renter moves these days is a desire for more space, indoor and outdoor.
The success of projects like X Denver will hinge on consumer preferences and if they shift back toward the draws of dense urban living that drove the city boom of the past decade, Warnock said.
“So many people are tr ying to move to get that extra bedroom and backyard,” he said. “The success of those things will depend on how much peoduring ple value their private space and whether the density and sharing-community stigma that COVID has created fades quickly.”
The X Company isn’t the only developer that still views Denver proper as fertile ground.
International real estate service firm CBRE released a report earlier this year ranking the Denver area as a whole the third-best market in the countr y for new multifamily housing development going forward.
North Carolina developer Crescent Communities announced in early February that it was starting construction on a $181 million, 483-apartment luxur y building at 1300 40th St., about two miles north of X Denver.
It’s not near downtown, but last week, a partnership of CMG Capital and Massimino Development celebrated starting a $50 million luxury apartment project on East 56th Avenue near Denver International Airport. The Momentum at First Creek project will eventually feature 200 apartments spread between six buildings, according to a news release.
Despite the new highwater mark for apartments in planning, the pipeline of under-construction apartments in the metro area has been shrinking in recent years, according to Scott Rathbun, a consultant with Apartment Appraisers, Apartment Insights’ sister company.
Developers’ ability to bring planned units to market, what Rathbun and Apartment Insights call “developer success rate,” continued to fall during the pandemic. Longtime issues like high construction costs and slow planning, zoning and permitting processes were exacerbated by the pandemic “creating a sort of natural governor on what we are able to build, which has kind of stopped us from overbuilding the market and created some level of balance,” the consultant said.