The pulse of the downtown Denver real estate market for residential rentals and sales remained strong through the second quarter of 2017. From nearly every vantage point in the Denver area you will probably notice more tower cranes dotting the skyline than ever before, a scene likely to remain in place for a few more years. Many of these projects have been in the works for the last 18-24 months and are just getting out of the ground, but not all are luxury rentals. Apartment growth hasn’t slowed but rent prices are continuing a flatlining trend within the high-end luxury category, and construction concessions and other leasing incentives remain competitive among new properties in lease-up phases.
One of the biggest inhibitors to affordability and the overall balance of supply and demand continues to be rising construction costs. Even construction lending is tempering some activity. But in May, members of the Colorado Association of REALTORS® (CAR), as part of the Homeownership Opportunity Alliance (a bipartisan statewide coalition of housing advocates, business leaders, metro area mayors and builders), stood with Gov. John Hickenlooper as he signed HB 1279, the Construction Defect Actions Notice Vote Approval bill, into law. HB 1279 requires 51% of the responding/eligible homeowners to pre-authorize the Home Owners Association Board’s filing of a construction defect action, changing the condo construction risk profile considerably. The informed consent law is seen as a first step towards encouraging builders and developers to start building condos and townhomes again while protecting the legal rights of individual homeowners. As it is written, nothing in the law stands in the way of individual owners who have a legitimate construction issue from seeking a legal remedy. The law also protects homeowners by ensuring they are aware of a potential lawsuit that could impact selling or refinancing their home.
While this is overwhelmingly good news for those in the market to purchase a condo, there is a lot of pent-up demand to serve, sales activity will be competitive and currently there is just a trickle of development activity and proposed projects in the condo space. There is no doubt developers will be held to a higher standard, both among colleagues in their industry and in the communities they build in going forward. This is an important time for Denver to plan and build for a stronger homeownership network, and builders need to respond in a way to serve a wide audience.
There is a lot to look forward to in the second half of 2017. Rents in the downtown area for most luxury properties have flatlined and concessions will remain key to successful leasing for many months to come. Some notable new apartment high rises are making their debut with their first phase of lease-up and the long anticipated Coloradan Condo being developed by East West Partners in the Union Station neighborhood will have sales commence in July. The building is already attracting eager buyers from millennials to investors and empty nesters. Hype around condo conversions is present in the industry but these processes will take years.