Hornstein Fetter August 2018 Market Insight


Denver: A Multifamily Unicorn

by Scott Fetter

Denver’s rent growth over the past decade has been stronger than every major metropolitan area outside of San Francisco. So, what gives? Why did Denver multifamily jump to the top of rent growth nationally while surpassing other metros that had even better job growth?

That’s a loaded question, of course. But I believe that at least part of the answer is that since 2010 Denver has seen a correction in the relationship between cost of renting and cost of owning residential real estate. It was cheap to rent in Denver compared to buying a house and our rents had room to improve regardless of job growth. Having a robust economy certainly pushed that growth. A lot. But our rents grew almost 50% over just 7 years.  I would argue that as we work our way through 2018 that correction has taken place. Rents are now growing at a modest 3% while housing prices, despite 30%+ rise in interest rates, continue to march forward.

So, what’s next? Ideally, we, as multifamily real estate investors, would again find that unicorn that is a city with good job growth that’s also due for a cost of living correction. But does such a place exist in 2018? We’ve seen our clients go looking for it and we’ve seen a good number of them come back.

The reality is: a city with a similar combination of rent correction and job growth may not exist today. But fear not, because job growth remains strong and real estate values, as a result, continue to grow. Though tempered compared to recent years, real estate remains an attractive investment and Denver continues to be a top performer. In fact, of the 50 major metros, Denver is #12 with almost 3% job growth in the past 12 months. The high flyers are the Bay Area and Florida, with Texas also showing good gains.

The unicorn that made Denver so hot may have gone to pasture. But Denver is still a top metro nationwide for job growth and even though rents are less affordable in 2018 than they were in 2010, Denver continue to provide the jobs to afford them.


Scott Fetter | 303.962.9564 | SFetter@PinnacleREA.com