Three to five years ago, few would have picked the Denver apartment market to perform as well as it has. But with nation-leading rent growth, strong economic and demographic tailwinds and a structural shift in the single-family market, the Mile High City apartment market is firing on all cylinders. Starting in late 2010, the Denver/Boulder market has been elite in terms of apartment rent growth. And since then, annual rent change has continued strong upward momentum. In fact, Denver led the country in 1st quarter 2015 with a 10.5% year-over-year rent hike, a 20-year high for the metro.
Strong rent growth has come despite decade-high new supply levels. In fact, Class A product, which is vulnerable to competition from new supply, posted same-store rent growth of 9.3% in year-ending 1st quarter 2015. When looking at effective rental rates over the last five years, all property classes posted strong gains, but mid-rise assets led the pack. Average effective rental rates among surveyed mid-rise properties increased 55% since 2010.
Over the past five years, rent change in the Denver area has accelerated at almost twice the pace of the MPF Research top 50 U.S. markets. During that time, average apartment rental rates in Denver/Boulder rose nearly 40%, a top five performance nationally.
1. Denver is a Millennial magnet
Metro Denver continues to rank among the nation’s fastest growing metros, with annual population growth averaging 1.7% over the last 10 years. Driving population growth is the 20- to 34-year-old cohort, critical to the apartment market. As such, Denver has become a Millennial boomtown. In fact, over the last three years, Denver has seen one of the nation’s largest influx of Gen Y’ers. That age segment has grown nearly 11% since 2011, twice the national rate and second fastest among metros, behind Texas’ capitol city Austin.
2. Denver continues to lure college-educated labor force
Additionally, Denver has one of the most educated workforces in the country. In fact, the Mile High City ranks #7 nationally for percentage of adults age 25 and over with a bachelor’s degree. In 2013, the 10 largest colleges and universities in the Denver metro enrolled a total of about 175,000 students. From 2007-2012, the U.S. Census ranked the Denver metro #2 for attracting college age workers. Strong Millennial growth coupled with a deep well of educated workers continues to drive apartment demand in the Denver area.