More and more luxury apartments are coming onto the market in metro Denver, causing rent prices to decline. Local experts are debating whether or not this is symptomatic of a bursting bubble.
Kelley Klobetanz, chief underwriter at Greystone & Co., recently told attendees of a multifamily housing conference, “I personally believe that Denver is overbuilt,” while Charlie Williams, a senior vice president at KeyBank, says of Denver, “We are a market that is diversified finally. Denver isn’t a boom and bust town anymore.” Williams adds that overbuilding has been a concern for the past four years, only to have new projects bring success, The Denver Post reports. Local lenders still require 20 to 35 percent equity to be put down by developers to insulate against any potential setback.
In the most expensive submarkets, like Cherry Creek and the Golden Triangle, rents are falling. One notable exception is LoDo, where the pairing of a Whole Foods Market under the Union Denver apartments has proven a big draw. It filled up easily and without any concessions. Another warning sign comes in the narrowing spread in rents between Class A units downtown and the older or lower quality Class B and C units. Typically, tenants have paid a 50 percent rent premium to live downtown in the nicest units, but now the gap is only 25 percent, and even lower once concessions are included.