Denver Multifamily Market Report
Market Overview
Denver’s economy benefits from a diversified and highly educated workforce, making it one of the most expensive non-coastal cities in the U.S. The presence of aerospace and technology employers contributes to higher incomes, with the median household earning nearly $25,000 more per year than the national average. The metro area is also a hub for young professionals, with 54% of the population under 40 and approximately 23% aged 25-39. These young, well-compensated workers are ideal renters, and the city’s demographics suggest continued demand for multifamily housing in the future.
Denver’s relatively affluent population has not translated into high homeownership rates. According to Zillow, only 5.1% of the city’s non-homeowner population can afford to leave the rental market, ranking Denver in the bottom 5 among U.S. metros. This is largely due to a significant shortage of single-family housing options. Despite national home prices falling more than 6% since the Federal Reserve began raising interest rates, Denver’s single-family home prices have risen by 1%. Builders are starting to adjust, with single-family permits up 21% year-over-year in July, although multifamily permits have dropped nearly 50% in the same period.
Denver By the Numbers
- Vacancy Rate: 10.0%
- Rent Per Unit: $1,880
- Annual Rent Growth: -0.4%
- Cap Rate: 5.1%
- Price per Unit: $312,560
- Dollar Volume: $3.3B
Last 12 Months | Source: CoStar Group
Denver Multifamily Market Performance
Developers ramped up multifamily construction in 2022, initiating nearly 19,000 units during the year. This surge was largely driven by the city’s expanded Affordable Housing Policy, which creates additional hurdles and requirements for developments approved after the policy’s effective date. Many of these units were completed in 2024, pushing vacancy rates up 250 basis points to 10% as of Q2 2024. The impact of new development has been further intensified by the high concentration of projects in Downtown Denver. While demand in the metro area has been rising over the past few quarters, it has not yet caught up with the pace of development. Looking ahead, much of the apartment pipeline has worked its way through the system, which is expected to ease the downward pressure on vacancy rates.
The rapid pace of Federal Reserve rate hikes in 2021 significantly affected the transaction market in Denver. A disconnect emerged between buyers and sellers as rent growth slowed and borrowing costs rose, pushing cap rates higher and making investments in the city less appealing to potential buyers. Seller expectations have since adjusted to align with buyer demands, leading to a 16% decrease in per-unit pricing from peak to current levels. These price adjustments have helped facilitate a modest recovery in deal flow, with more transactions becoming feasible as the rate-cutting cycle begins. While further interest rate adjustments and fundamental improvements are necessary for deal flow to fully rebound, activity is picking up from the lows recorded in 2023 and the first half of 2024.
