Denver Corporate Housing Property Prices Rise as Inventory Shrinks

The available inventory of suitable corporate housing in Denver continues to dwindle, pushing up demand, and the prices during the second and third quarters of 2011.

According to November numbers from Metrolist Inc. the Denver inventory is at its lowest point for years. It cited 14,275 available properties across the market for October 2011, which is down almost 30 percent on the same time last year.

The list of available properties inevitably increases demand on those still available, and therefore prices. The corporate housing market is one of the few areas of real estate that has maintained activity throughout the recession and beyond, but how much increase in cost it can withstand remains to be seen.

Despite the decrease in inventory, sales are also slightly down despite positive noises coming from the market. According to Metrolist, sales were down during October and November. Properties under contract fell 12 percent, while those sold fell 4 percent.

The Denver corporate housing market is seeing similar numbers, despite some high profile tower sales this year. Rents are slowly creeping up too increasing yield for landlords, and the financial burden for renters.

On the flip side of that, any company with a portfolio of corporate rentals to sell would find a slew of hungry buyers. Any high quality property put on sale today would most definitely get a much better price than one put on the market 30, 60 or 90 days ago.

Furnished apartments are particularly attractive to commercial landlords as they can be quickly rented and begin paying for themselves right away. There is still a limited supply of such properties, meaning they sell very quickly.

The increase in property values is great for sellers, but not so much for buyers. Corporate rental companies may have deep pockets, but the average residential buyer doesn’t. The difficulty in getting a mortgage and increasing property prices threaten to price many buyers out of the market.

With the residential market being at the core of real estate, anything that impedes the ability to shift property isn’t a good thing. Historically, real estate has been at the heart of any economic recovery in this country, and there is no reason to believe this time will be any different.

With fewer corporate rentals on the open market and no new ones being built, it begs the question as to how real estate can help us this time round. While pressure is still being applied to the banks and financial institutions to increase lending, we need a steady flow of property for people to buy once they get that loan.

If this trend continues, and inventory shrinks as forecast, the real estate market is going to grind to a halt again. We can only hope that this situation prompts those sitting on properties they want to offload to put them out there, and keep them affordable. This is a difficult market to predict, the most difficult one we have seen in a generation, so only time will tell this time round.

Is Denver Commercial Property Bouncing Back?

 

If initial numbers are to be believed, Denver is one of three cities in the country to be bucking the sluggish commercial real estate market trend. Denver, Minneapolis and Dallas all posted positive numbers this quarter, up almost 50 percent higher than average.

Minneapolis saw the largest gains with 127 percent dollar increase in corporate property sales, Dallas had 108 percent, and our own Denver, 89 percent. That’s compared to a national average of 47 percent dollar volume investment in commercial real estate overall.

It seems investors are slowly beginning to embrace risk once more. The real estate market is tried and true, and certainly capable of yielding more than capital or bond markets. Many money men are remembering this and coming back to good old bricks and mortar.

Some of the notable purchases in Denver corporate housing and commercial real estate have been significant. For example, Invesco Ltd. of Atlanta purchased a 22-story Denver tower for $213 million in February. This was the highest price paid for an office building in our city’s history.

KBS Real Estate Investment Trust II purchased Granite Tower, a 31-story downtown property, in December 2010 for $149 million, the biggest office transaction in the city last year. The building is now almost completely leased.

The improved fortunes of the city make it attractive to investors. The increase in job potential and population makes Denver a worthwhile risk. With the likelihood of more employers coming to the city, and a sunnier outlook overall, the Mile High City looks to be over the worst of the economic woes for now.

While we certainly wouldn’t say the downturn is over, the green shoots of recovery have been growing in the Denver corporate housing market as well as the commercial real estate sector. Purchases are up, demand is growing, and rents have increased slightly over last year.

The population is also increasing, climbing 8.2 percent from 2000 to 2010, according to the U.S. Census Bureau. Word of Denver’s ability to weather the storm has obviously gotten out and employers as well as new residents are gradually appearing.

In the bigger picture, Wall Street has sold more property bonds this year than they did last year. Last year saw a surge of almost 45 percent in the sale of property-related bonds, almost $119 billion worth. With the uptake of corporate property and commercial real estate, this amount is believed to increase again over this year.

The Denver corporate rentals market is also going to improve through 2012 as more employers look to up and coming cities to base their operations. They want stability, infrastructure and growth, all things that Denver offers in spades.

While there is still some way to go, the Denver property market is making its way slowly into the light. We are well placed to attract new investment, new employers, new corporate housing developments and new residents in equal measure over the coming years.