Ten Thousand Waves is a world-class resort on a mountain road in Santa Fe.
But what is really making waves in Denver apartment circles is the number 10,000.
Specifically, the observation by apartment guru Cary Bruteig that developers can’t build much more than 10,000 units in the Denver area has given developers much more confidence that the market isn’t going to be tripped up by overbuilding.
“It was huge when Cary said we can’t build more than 10,000 units,” Jeff Hawks, a vice chairman of ARA, a Newmark company, told me last week.
“Cary had been saying we were going to be building 12,000, 13,000 or more units, based on what is in the pipeline, but the numbers kept coming in at 9,500 to 10,000,” Hawks said.
In his latest Apartment Insights report, Bruteig, principal of Apartment Appraisers and Consultants, noted that construction delays have “restricted delivery of completed units to 10,000 or less over the last few years.”
And in his fourth-quarter, 2017, Apartment Insights report, Bruteig noted: “The 10,000-plus units completed in 2017 would indicate an almost three-year supply is under construction (30,000/10,000), yet the vast majority of construction schedules show delivery in 24 months or less. This would point to completing over 15,000 units per year. The delays result from a lack of available manpower. While the construction labor base should have grown by now … there is still a growing number of projects under construction competing for the limited labor supply. We expect construction delays to continue and possibly worsen with material shortages due to the hurricanes and fires in California.”
Hawks said, if anything, the labor shortage is going to worsen.
“A year ago, we were talking about construction workers taking off for higher-paying jobs in Houston, following the damage caused by the hurricane. Now, we are going to see workers head to North Carolina and South Carolina” in the wake of Hurricane Florence.
Building fewer than 10,000 apartment units when demand is so strong is like living below your means.
The Denver area apartment market has been experiencing record rent levels, record absorption rates and falling vacancies. And with 10,000 or fewer apartment units being added to the market annually, it gives buyers confidence that Denver’s apartment market isn’t in danger of cratering anytime soon.
For example, earlier this year IRET of Minneapolis paid $128.7 million for the 390-unit Westend apartment community at 3500 Rockmont Drive, Denver. The property was listed by the ARA team of Hawks, Shane Ozment and Terrance Hunt.
Tellingly, every multifamily developer and broker I speak to about the prospect of overbuilding quotes the 10,000 number, saying that provides comfort that the market isn’t going to become overbuilt anytime soon – even if they don’t attribute the number to Bruteig.
Bruteig, on Oct. 17, is sure to address the constraints to building a maximum of 10,000 apartment units at the upcoming 2018 Fall Multifamily Development & Investment Conference & Expo.
The conference, sponsored by the Colorado Real Estate Journal, will be held from 7 a.m. until 11:45 a.m. at the Hyatt Regency Aurora-Denver Conference Center.
More than 500 industry leaders are expected to attend the conference.
In addition to Bruteig, others scheduled to speak at the conference include:
- Kevin McKenna – executive managing director, ARA;
- Jeff Wikstrom – regional president, Colorado multifamily, Evergreen;
- Steve Gardner – senior associate/managing director, VTBS Architects Denver;
- Heather Campbell – founder & principal, Double Dutch Creative;
- Bryan Stern – president, Echelon Property Group;
- Jim Alexander – senior vice president – investments, Equity Residential;
- Matthew Tice – senior vice president, Inland Real Estate Acquisitions LLC;
- John Jordan – executive director, acquisitions, UBS Asset Management, Real Estate & Private Markets;
- Max P. Siler – chief operating officer, Grand Peaks Properties Inc.;
- Mark Peppercorn – senior vice president – acquisitions, Simpson Housing LLLP;
- Shane Ozment – vice chairman, ARA;
- Jarvie Worcester – managing director, Mountain States Division, Trammell Crow Residential;
- Jeff Booth – executive vice president development, Embrey Partners Ltd.;
- Chris Cowan – executive managing director, ARA;
- Jason Smith – vice president of development, ReyLenn Properties LLC;
- Kevin Brinkman – CE, Brinkman; and
- David Jaudes – vice president of multifamily development, McWhinney;