These are rare circumstances we’re experiencing in Colorado Springs – accelerating job growth, 7 percent apartment rent growth, 4 percent market vacancy and restrained apartment development. Colorado Springs apartments continue to attract acquisitions from large market investors. West Coast and Denver apartment investors see Colorado Springs as an “upswing” market, with still much potential. This market also is a safe haven from the risks in overbuilt apartment markets and overheated stock markets. Further, Colorado Spring’s strong job growth across various sectors is driving strong population growth. These dynamics bode well for local multifamily investment.
•Forecast. With increasing job growth, our apartments will respond with high occupancy rates and significant growth in rental rates in the short term, at the very least. Investor interest will focus more on Colorado Springs due to weakening rental markets in Denver, Fort Collins, Loveland and Greeley. Rent growth has slowed in Denver, yet Colorado Spring’s rental rates remain affordable by comparison and still have room to move higher. Additionally, average rent compared to median income is still reasonable in Colorado Springs compared to Denver. This has lured many people to reside in northern Colorado Springs, while commuting to Denver where salaries are significantly higher.
•Population and job growth. El Paso County, which holds the clear majority of the population for the Colorado Springs metropolitan statistical area, has had population growth of almost 2 percent every year since the early 2000s. This is roughly double the population growth rate of the U.S. The past growth will be eclipsed by future growth. El Paso County is one of four counties in the state projected to have a population increase of at least 300,000 people between 2010 and 2040, according to the State Demographer’s Office. At the current pace of growth and with the given age composition, El Paso County needs approximately 5,400 new jobs to be created per year. Since 2013, the region met and exceeded this threshold. This positive trend continues with 7,083 new jobs from first-quarter 2016 to first-quarter 2017.
These new jobs are primarily concentrated in higher paying sectors, including health and education services, and professional and technical services, specifically information technology. Registered nurse and software engineer have been the two occupations with the highest number of job postings for the last two years. This trend should continue, as the Colorado Department of Labor projects the high rates of employment growth to be in the health care and professional/technical sectors from 2015 to 2025. Furthermore, the median salary in Colorado Springs for job postings from September is higher than the Colorado median – $72,050 vs. $65,575. The current regional median is an impressive 30 percent higher than it was in April 2015, according to Talent Neuron. The healthy job growth and salary increases have large implications for all residential real estate, especially multifamily.
•Fort Carson. This region has five military installations with a combined employment contribution in 2017 of approximately 55,000 workers (including active duty and contractual workers), and this still only represents 17 percent of all workers in the region. The current positive trajectory with new jobs in high-skill sectors alongside the statewide in-migration of highly educated people implies that the past reliance on the military is dwindling.
•Average apartment vacancy: 4 percent. The bottom-line message from the Q3 Apartment Insights vacancy survey is local rental market stability. The citywide average vacancy rate for Colorado Springs has been consistently within 1 percent above or below the current vacancy rate for over two years.
•Average apartment rents: $1,020 per month. Colorado Springs apartments are achieving the highest-rent growth of any Front Range metro area. Rents are growing at a highly consistent rate of between 6 and 9 percent annually since 2014. The current rent reflects a $1.25 per square foot average. Note, the average apartment rents in Denver have increased $700 per month – or doubled – since 2004. Colorado Springs average rents are up only $400 per month during the same period and still have room to rise.
•New development: 2,500 units. Colorado Springs has 2,500 apartment units under construction with 2,600 units planned. This compares to Denver’s 30,000 apartment units under construction with another 25,000 units planned.
Colorado Springs was late to the party with economic recovery and rent growth. This may prove to insulate Colorado Springs from the over construction that some first-tier cities are experiencing that can result in the painful burst of a bubble.