(To read more on the multifamily market, click here.)
DENVER-Marcus & Millichap, in its most recent research report, is forecasting that the metro-area apartment vacancy rate this year will drop 100 basis points to 7%, as rental demand remains robust. In 2005, it notes, the rental vacancy rate fell 160 basis points due to strong absorption and limited construction.
Marcus & Millichap also projects that asking rents this year will rise by 2% to an average of $863 per month, while effective rents will increase by 6.7% to $790 per month. "Owners will have an ample amount of concessions to burn through this year," the report notes.
The improving fundamental moves Denver up to No. 24 on Marcus & Millichap's National Apartment Index. Last year, it was ranked No. 25. Orange County, CA is taking the top spot in 2006, up from No. 3 in 2005, while Detroit is at the bottom this year, compared with No. 35 in 2005.
"The long-awaited recovery of the Denver apartment market is well under way and job growth is set to continue," the report notes. "As a result, apartment fundamentals are expected to strengthen further in 2006."
That should fuel increased investor activity in the metro-area market, Marcus & Millichap notes. Apartment prices were relatively stagnant from 2001 to 2004, but began to rise in 2005, it notes.
It expects the hottest investment markets to be Downtown Denver and the suburbs of Littleton and Englewood. "Investment demand is high in the Littleton and Englewood areas due to strong job creation, while Downtown has become an investment target due to the growing popularity of living close to work and entertainment," the report notes.
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