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.