Saul Levy
Director, ARA Newmark, Denver
The multifamily market in Colorado Springs finished strong in 2016, with total apartment sales over $550 million. With 2015’s total sales volume of $453 million and 2014’s $485 million, the total apartment sales volume for the last three years is approximately $1.5 billion – more than the preceding 10 years combined, proving the continued strength of the market.
Colorado Springs recorded four transactions over $50 million last year. Before 2016, Colorado Springs had just one apartment sale greater than $50 million. Transactions blew past the long-held $200,000-per-unit barrier, with increased activity in that range anticipated in 2017. A notable transaction, Grand River Canyon, sold in December for the highest total sale price in Colorado Springs history.
The continued success of the multifamily market in El Paso County is due, in part, to the unmatched positive market fundamentals. With 4.3 percent vacancy, 8.4 percent effective rent growth, low unemployment, strong job growth and a minimal apartment construction pipeline, Colorado Springs is looking better than ever for residents and investors alike. Rent growth in Colorado Springs is among the top five in the nation and is predicted to continue strong in 2017.
Even with all of the sizable growth, the gap between market rent in metro Denver and Colorado Springs has never been wider. The fourth-quarter average market rent in metro Denver was $1.55 per square foot, and Colorado Springs recorded an average market rent of $1.17 per sf. This 38-cent gap is three times the historical average from 1996 to 2013. Thus, many renters in Denver could see an opportunity to save $250 to $500 per month by moving to Colorado Springs. To put this in perspective, the average market rent in the Denver area is the same as the highest-end, Class A communities in Colorado Springs. In 2017, investors can expect continued rent growth in Colorado Springs that will bring this gap back to the historical average.
While some residents choose to commute to Denver for work, many others will look for quality employment in Colorado Springs. Several industry segments are experiencing growth in the area, particularly health and social services, accommodations and food, education and professional/technical services. Several new businesses have moved into or expanded their operations in the city, contributing to the healthy expansion of the Colorado Springs’ economy. Examples include Sierra Nevada Corp., Raytheon, Progressive Insurance and root9B.
With unemployment at 3.5 percent in October, well below the national average of 4.7 percent, and approximately 7,776 new jobs created between second-quarter 2015 and second-quarter 2016, the outlook for employment is very positive.
“We look forward to another great year in 2017, with expected growth in the medical and cyber sectors as highlights,” said Bob Cope, City of Colorado Springs Economic Development director, in a recent report.
With over $1 billion proposed and under construction in the health care and medical industry in El Paso County, health care has become one of the fastest-growing industries in the region, currently employing approximately 11,000 people.
The area is home to two major hospital systems: Centura Health’s Penrose-St. Francis Health Services (consistently rated as the fourth-best hospital in Colorado and one of the country’s top 50) and the University of Colorado Health System (ranked as the sixth-best hospital in the state). In November, Children’s Hospital/Memorial Hospital North broke ground on a more than $150 million expansion, expected to be completed in 2018. Similarly, Penrose-St. Francis and UCHealth Memorial Hospital embarked on facility expansions throughout the region.
Currently ranked the fifth-best place to live in the nation by the U.S News & World Report, Colorado Springs has the infrastructure in place to become a regional force in the near future. One of the most provocative and innovative opportunities in the city is within the rapidly growing field of cybersecurity. As per The Gazette, Colorado Springs is home to more than 00 cybersecurity companies, nonprofit organizations, military contractors and units specializing in cybersecurity, including the National Cybersecurity Center, which began operating in November.
Further, Tatiana Bailey, director of the University of Colorado at Colorado Springs Economic Forum, points out the industry had more than 450 unfilled cybersecurity openings in November, with annual salaries between $60,000 and $85,000. The cybersecurity industry is expected to have up to 1.5 million vacant jobs, nationally, within two years – perfect opportunities for veterans and other technology professionals who desire to move into the fast-growing field.
Given all of these recent developments, Colorado Springs should benefit from only accelerated growth in 2017 and beyond. An ever-diverse economy is in expansion mode, with increasing populations, household incomes and home values, coupled with an expanding job market with significant developments in health care and medical services, high-tech industries and the service sector. An influx of residents will create greater demand in multihousing and provide an attractive alternative for both investors and renters to Colorado’s capital city.
