What goes up must come down, as the saying goes, but laws of Newtonian physics don’t appear to apply to multifamily real estate in Colorado. While some investors have chosen to stick to the sidelines and wait out the end of this once-in-a-lifetime run of growth in the market, smart investors are continuing to find opportunistic value along the Front Range. Those content to wait, however, may be missing out on appreciation to be found in pockets that have traditionally been overlooked in favor of tried-and true neighborhoods like Capitol Hill, Congress Park, Wash Park and the Highlands.

Investors have begun to feel that the Central Denver submarkets are topping out as rents have outpaced income growth and low cap rates are now butting up against rising interest rates. This has caused savvy buyers to look for the next beltways where money can still be made as the broader apartment market levels off. Jefferson County has traditionally been the “next” submarket that grabs buyers’ attention after Central Denver as it’s farther from the historically stigmatized Aurora market and closer to the mountains. However, we’re seeing prices in Lakewood that rival those of Central Denver, leaving many to speculate on where the next opportunity lies.

Colorado Springs has been on a tear, jumping from an average of a little more than $88,000 per door in the first quarter of 2017 to more than $130,000 per door in the current quarter. The average price per unit in Pueblo has grown from $35,000 per unit at the beginning of 2016 to more than $60,000 in the most recent quarter. Weld County is currently the fourth fastest-growing county in the U.S. and has shown average cap rates below 6 percent in the most recent two quarters.

Closer to Denver, Aurora has begun to shake off that “no-go” reputation and has seen a pop in values in 2018. It wasn’t long ago that you could pick up a Class C property along the Colfax corridor for 40-something thousand per door, but we are now seeing prices consistently north of $125,000 per unit. The three major growth catalysts in this market are Anschutz Medical Center to the east, the Park Hill neighborhood to the west and Stanley Marketplace in the middle. These assets have Aurora poised to follow a similar growth pattern to what we’ve seen in Jefferson County.

Westwood is one of the last true Denver neighborhoods to “pop,” but a drive down Morrison Road will provide ample evidence that investors are transforming that submarket. It will be interesting to watch how the neighborhoods close to the I-70 “Ditch” project and the $1 billion National Western redevelopment will be affected. Will they be too late in the cycle to take advantage of low interest rates and red-hot demand, or will those be the new pockets that heat up as the market falls back to Earth?