Rents in Denver have fallen during the pandemic, according to a recent market report, but that doesn’t mean apartment developers are less interested in a city that was a hot spot for rental growth before COVID-19 called.
According to Denver data firm Apartment Insights, the number of potential homes in the planning pipeline for the subway area hit a record 46,000 in December.
The X Company, the Chicago-based developer behind the X Denver Apartment Tower, which is close to completion after almost three years of construction north of Coors Field at 3100 Inca St., embodies this enthusiasm for the Mile High City, also in view of the shift in the Consumer preferences.
X Denver offers traditional studio and one-bedroom apartments in its 12-story frame with 455 apartments. The X Company also makes it possible to rent individual bedrooms with their own bathroom in a “co-living” with two, three or four bedrooms. Apartments with shared kitchen and common areas. Tenants can bring roommates or simply rent a room and let fate decide who shares a refrigerator with them.
The cheapest option at the X Denver is a room in a two-bedroom shared apartment. According to the building’s website, if the first phase of the building opens in April, it’ll be just $ 985 a month.
When COVID-19 spread in Colorado last March, it added a new calculus to living in large apartment buildings with hundreds of other people, much less in a building that was literally built around the idea of common space.
McKenna Solomon, 25, moved from a one-bedroom apartment in the Berkeley neighborhood of Denver to a two-bedroom apartment in Chaffee Park that she shares with her partner in January.
“There are definitely fewer common spaces now that we are in this apartment. That definitely helped, ”said Solomon. “I didn’t want to pass 20 or 30 people in one hallway.”
Noah Gottlieb, CEO of the X company, is not sweating the pandemic, at least not in public. Gottlieb said he and his partners are opposed to “short-term decision-making” and are confident they offer something that will be successful in Denver.
How sure? X Denver’s sister project, a 22-story building with 410 apartments, which Gottlieb calls “XD2”, is already running on 21st Street and Arapahoe Street and laid the foundation stone late last year. The company is under contract on a third lot near Welton and 20th Street.
Gottlieb didn’t release any hard numbers, but said the pre-release on X Denver is doing better than the company had hoped.
“We have to increase our (leasing) staff because the number of inquiries we receive is higher than expected. And we were optimistic about the start, ”said Gottlieb.
X Denver originally planned to welcome its first tenants last week, but those moves have been delayed until at least April due to non-pandemic construction delays, X Company partner Andrew Kerr said during a tour last week .
Work on the project was frozen on Friday when a city building official discovered that an employee was living in one of the units before the building passed inspections and received permanent occupancy certificates, Denver planning officials said last week. This resulted in the general contractor license of ARCO / Murray being temporarily suspended until the employee left the building and ARCO / Murray representatives could meet with city officials.
The problem was resolved on Monday morning, city officials said.
X Denver seems to be on track to hit the rental market on the way up.
Apartment List found that Denver rents rose nearly 1% in February. But the city’s median rents have dropped more than 5% since last February, reaching $ 1,263 per month for a one-bedroom unit and $ 1,548 for a two-bedroom unit last month.
The living room and bedroom of the 2-bedroom unit in the X Denver building at 3100 Inca St. in Denver on Wednesday, February 24, 2021. The Chicago-based X Company is bringing X Denver: an 813-bed apartment building and members’ club are just a few blocks from Coors Field. (Photo by Hyoung Chang / The Denver Post)
Other large cities recorded more pronounced declines. In San Francisco, New York, and Seattle, rents fell 20% or more in February, according to survey results. But the decline in Denver is still significant, said Apartment List researcher Rob Warnock.
Much of the rent migration seen during the pandemic was due to economic concerns, Warnock said. In bad economic times, people are looking for more affordable housing. Another driving force behind tenant movements nowadays is the desire for more space indoors and outdoors.
The success of projects like X Denver will depend on consumer preferences and when they move back towards the dense urban living conditions that sparked the urban boom of the past decade, Warnock said.
“So many people are trying to move around to get that extra bedroom and back yard,” he said. “The success of these things depends on how much people value their private space and whether or not thThe stigma of density and sharing community that COVID created is rapidly disappearing. “
The X Company isn’t the only developer who sees Denver as fertile ground.
International real estate services company CBRE released a report earlier this year ranking the Denver area as the third best market in the country for future multi-family home development.
Crescent Communities, a developer based in North Carolina, announced in early February that construction would begin on a luxury building of 483 homes valued at $ 181 million at 1300 40th St., about two miles north of X Denver.
It’s not near downtown, but last week a partnership between CMG Capital and Massimino Development celebrated the start of a $ 50 million luxury condominium project on East 56th Avenue near Denver International Airport. According to a press release, the Momentum at First Creek project will eventually include 200 apartments spread across six buildings.
Despite the new high water mark being planned for apartments, the pipeline of apartments under construction in the subway area has shrunk in recent years, according to Scott Rathbun, a consultant at Apartment Appraisers, the sister company of Apartment Insights.
The ability of developers to bring planned units to market, what Rathbun and Apartment Insights refer to as the “developer success rate” continued to decline during the pandemic. Longstanding problems such as high construction costs and slow planning, zoning and approval processes were exacerbated by the pandemic, “creating a kind of natural governor for what we can build, which has kept us from overbuilding the market and getting a certain amount of it To create balance, “said the advisor.
Hyoung Chang, the Denver Post
Denver’s “Bark Park” for residents ‘pets in Denver, Colorado on Wednesday, February 24, 2021. The Chicago-based X Company is bringing X Denver with them: an 813-bed apartment building and members’ club just blocks from the Rockies Stadium is located.
In 2020, developers completed 10,300 new apartments, a decrease of more than 22.5% from the record of 13,300 in 2018, according to Apartment Insights. Of these new deliveries, 9,300 tenants were found, which corresponds to an absorption rate of around 90%. We made moves in the Central Business District particularly strong in the last three months of 2020.
“A healthy vacancy rate is around 5%,” said Rathbun. “So we expected the absorption to be worse than it was, and that only shows the resilience of the rental market in the metropolitan area.”
Developers will go to greater lengths to fill their new apartments, Rathbun said, mainly by offering discounted rents. X Denver advertised a two-month free rental on Instagram last week. One catch: Kerr said the building only offers 15-month leases for its first crop of tenants.
Surprisingly strong leasing on new projects is at odds with the economic troubles many in Colorado are suffering from during the pandemic. According to a press release, the Colorado Department of Local Affairs distributed $ 35 million in state and federal funds last year to help prevent foreclosures and evictions. After Governor Jared Polis’ eviction moratorium expired, the department received $ 42 million requests for assistance in January alone.
“It’s a problem that the people who rent brand new buildings are mostly employees and are not affected by the pandemic,” he said.
Older properties, which are more affordable for people in badly affected industries like hospitality, have suffered a significant slump, particularly in the city center, Rathbun said.
Upcoming high-end apartment projects like the Momentum at First Creek, which developers say will start rents at $ 1,395 per month in spring 2022, are doubling in terms of social characteristics.
In its press release, Momentum developers highlighted the project’s 7,750-square-foot clubhouse with a coffee bar and collaborative offices, a resort-style pool, and other outdoor facilities like a communal pizza oven.
X Denver offers a similar collection of amenities on the top two floors.
An entire wing of the 11th floor of the building is dedicated to the common work space. Additional common areas and reservable conference rooms are located on the 12th floor, just behind the commercial gym with a separate group gym and private all-day dining restaurant. There is a rooftop pool area with its own outdoor bar.
The company has two buildings living together in Chicago, but the size and size of X Denver is way beyond either, Kerr said. The scale led to the establishment of an X Company “Club” for people who do not rent in the building. For USD 275 per month, anyone can access the top two floors of the building via a special elevator.
“We really focus on the value. The value of (X Denver) is really created by not having a gym membership and not being tricked into joining WeWork, ”said Gottlieb of the convenience package.
Winter Roybal, 24, and her partner are looking for a new apartment near the city center. Both students at the University of Colorado, Denver, found that the move to work-from-home made their 400-square-foot studio near Cheesman Park particularly cramped.
A private outdoor space would be nice, but Roybal is also interested in buildings that will help her meet people when the pandemic recedes.
“I think the idea of having more common space inside the apartment building so you can meet people, especially in Denver’s mid-twenties, is a great amenity,” she said.