Q4 2024 Denver Multifamily Market Report

Denver Key Findings

• The Denver multifamily market has demonstrated resilience in Q4 2024, supported by strong population growth and the continued appeal of suburban markets.
• While vacancy rates increased and rent growth slowed due to record levels of new construction, the surge in supply has started to level off, with new construction starts falling to a decade-low.
• Despite rising vacancy, the outlook for 2025 suggests a return to more stable conditions with slower completions and improved rent growth.

By the Numbers

• Sales Volume: $1.65B
• Market Asking Price per Unit: $305K
• Cap Rate: 5.2%
• Vacancy Rate: 10.5%
• Average Market Asking Rent per Unit: $1,819
• Rent Growth: $1,767
• Units Delivered: 3,739
• Units Under Construction 13,790
• Units Absorbed: 1,164 | Last 12 Months | Source: CoStar Group

Denver Demographics

• Unemployment Rate: 4.2%
• Current population: 3,046,017
• Households: 1,264,322
• Median Household Income: $102,101

Denver has seen its strongest population growth since the pandemic, adding nearly 38,000 people in the past year, bringing the metro area’s population to over 3 million for the first time in history. The population uptick, particularly driven by domestic migration from California and Texas plus international migration, has supported stronger apartment demand, with 9,600 units absorbed in 2024—more than 30% higher than the pre-pandemic average. This influx of new residents coincided with an apartment development boom, adding 45,000 units to the market over the past three years. However, with this increased supply, vacancy rates have surged, reaching 10.5% in Q4 2024.

Market Performance

Vacancy & Absorption Trends

The Denver metro’s vacancy rate increased to 10.5% at the end of Q4 2024, up from 9.9% in Q3 2024. This rise is primarily attributed to the surge in new multifamily deliveries, which tested the market’s absorption capacity. Despite the increased vacancy, 1,164 units were absorbed in Q4, showing that demand for rental units remains strong, especially in suburban markets.

• Downtown & River North: These urban areas saw some of the highest vacancy rates, primarily driven by significant new construction. Downtown alone accounted for 25% of the region’s construction pipeline, contributing to a vacancy rate of 12.5% in Q4 2024.
• Suburban Markets: Suburbs like Lakewood, Wheat Ridge, and North Aurora have remained more stable, with less new supply and steady demand, keeping vacancy rates more manageable.

Market Forecast

As the Denver multifamily market moves into 2025, the anticipated slowdown in new construction will likely stabilize the market, leading to less pressure on vacancy rates. With completions forecasted to fall significantly in 2025 and beyond, landlords will benefit from a more supply-constrained environment, allowing for stronger rent growth.

• Vacancy Rate Forecast: Expected to stabilize in 2025 as new development slows and supply begins to catch up with demand.
• Rent Growth: A modest 3% increase in rents is expected in 2025, marking a return to the pre-pandemic average.
• Investment Outlook: Investors will continue to focus on suburban properties with value-add potential as competition remains high in urban markets.

Construction

Construction activity has cooled significantly. The multifamily construction pipeline, which peaked at over 34,600 units underway in early 2023, has steadily declined to 15,800 units by Q4 2024. This marks the lowest level of construction activity in a decade. With new completions expected to drop to 7,900 units in 2025 and further to 3,600 units in 2026, supply constraints are anticipated to help stabilize the market.

• Total Units Delivered (Q4 2024): 3,739 units, a slowdown from 6,783 units in Q3 2024.
• Projected Completions in 2025: Expected to drop to 7,900 units, a substantial decline from the 2024 peak.

Rent Growth and Concessions

Rent growth experienced a slowdown in Q4 2024, with the average effective rent falling by 2.59%, settling at $1,767 per unit. This decline is largely due to the imbalance between supply and demand, exacerbated by the large volume of new construction. Despite the recent drop, rents are still above pre-pandemic levels, and with the expected slowdown in new development, rents are forecasted to rebound in 2025.

Concessions, including up to eight weeks of free rent, have become widespread across the market as landlords compete for tenants. Nearly half of all Denver apartments now offer incentives, outpacing the national average of 28%. While concessions have historically been limited to newly-constructed properties, even stabilized properties have begun offering incentives to attract new leases and renewals.

• Average Market Rent (Q4 2024): $1,767 per unit, a 2.59% decrease from Q3 2024.
• Rents Forecast: CoStar Group projects a 3% increase in rents in 2025 as the market adjusts to lower construction levels and stronger demand.

Sales Velocity

Investment activity in Denver remained strong in Q4 2024, with $1.65 billion in multifamily transactions. The shift in investor focus toward suburban markets has continued, with a preference for properties with value-add potential. Even though the broader market is facing challenges with rising vacancy rates and slowing rent growth, multifamily properties remain highly sought after, particularly those built in the past 10 years.

• Q4 2024 Investment Volume: $1.65 billion, indicating ongoing investor confidence.
• Investment Focus: Suburban areas like Lakewood, Wheat Ridge, and North Aurora have seen increased investor interest due to the potential for rent growth and lower competition than in the urban core.

Buyer Origin

In Q4 2024, the buyer origin distribution for multifamily transactions in Denver showed a strong national and local presence, with 85% of purchases made by national buyers. Local buyers contributed 9% of transactions, while 6% came from international investors. Notable national buyers included investors from cities like Addison, TX, Arlington, VA, and Los Angeles, CA, reflecting a mix of institutional and private capital. Additionally, international buyers from Montréal, Canada, and Frankfurt, Germany, further demonstrate the global appeal of Denver’s multifamily market, with foreign investors seeking opportunities in this rapidly growing metro.