DENVER | Main Development Thread #7

[The Dirt]

Originally Posted by BG918

This looks great, right next to Industry on Walnut right where it curves to 40th

I wonder what Cde Baca's stance on this is.

[DenvertoLA]

They only show the building in the Radiant video for like 2 seconds TOPS. It's like they are hiding what it looks like haha

[TakeFive]

Our AMLI Riverfront Green doors officially opened on May 1st
Another 300 units added to the rapidly growing inventory.





Photos courtesy AMLI Riverfront Green via Facebook


Photo courtesy Studio PBA

[TakeFive]

Camden RiNo Opening Fall 2019!


Photo courtesy Camden Living

"I can't wait for the Grand Opening"
Oh, we'll keep you posted.

[TakeFive]

LMC finds their way to downtown with CANVAS on Blake
These 240 units appear to have been move-in ready in April.




Photos courtesy CANVAS on Blake Apartments/LMC

Very contemporary but perhaps more basic prior to LMC upping their game with Radiant. One thing I found in poking around is that they were sometimes referred to as 'apartments and condos' so I'm wondering if they didn't go ahead and do the required legal work for some day selling part of the project as condos.

Originally Posted by DenvertoLA

They only show the building in the Radiant video for like 2 seconds TOPS. It's like they are hiding what it looks like haha

Hah, I noticed that. My fave was the guy riding along on a Lime Bike.

[TakeFive]

1st Cap Hill move-ins June 21st
Another couple hundred units by:


Logo: Après Creative




Images courtesy Mill Creek/Modera Cap Hill

[bushw00d]

Is the point of posting all these deals w/ giant pictures to infer that somehow this supply will make a dent in the demand curve for housing? If so, it won't. New projects are more difficult to pencil than any time previously in the cycle right now and, outside of a few pockets of very concentrated supply (Rino, Golden Triangle, etc) AND barring some sort of economic collapse, we won't deliver enough units in the next 5 years to meet demand let alone foster a significant softening.

[laniroj]

Pretty pics and lots of projects coming online and yet vacancy decreased in the first quarter and rents still increased! From Ron Throupe and the vacancy and rent survey from 1Q2019...

-3,959 units delivered
-5,552 units ABSORBED
-Vacancy rate decreased from 5.9% to 5.4%
-Rent increased to $1,480.74, $24.65 higher than 4Q2018
-4.3% YoY increase

The cycle of not building enough homes continues...but at least we have thousands of new apartments at $2.25/sf or more!

[SirLucasTheGreat]

Originally Posted by laniroj

Pretty pics and lots of projects coming online and yet vacancy decreased in the first quarter and rents still increased! From Ron Throupe and the vacancy and rent survey from 1Q2019...

-3,959 units delivered
-5,552 units ABSORBED
-Vacancy rate decreased from 5.9% to 5.4%
-Rent increased to $1,480.74, $24.65 higher than 4Q2018
-4.3% YoY increase

The cycle of not building enough homes continues...but at least we have thousands of new apartments at $2.25/sf or more!

I was reading an interesting article on Sightline profiling a few cities that have built themselves out of an affordability crisis. While there are many different examples, it seems that many of the American cities that have kept prices low while growing have done so by sprawling. Obviously, we don't want the congestion or car emissions of a town like Houston. However, we now have the eighth largest rail system in the country. The light rail and commuter rail lines have triggered and will continue to trigger significant transit oriented development. To the extent that more residences are being built near places like 61st and Pena, 38th and Blake, I-25 and Broadway, Lone Tree City Center, etc...; hopefully that will place deflationary pressure on the higher demand areas in the urban core.

https://www.sightline.org/2017/09/21...dable-housing/

[twister244]

Originally Posted by SirLucasTheGreat

I was reading an interesting article on Sightline profiling a few cities that have built themselves out of an affordability crisis. While there are many different examples, it seems that many of the American cities that have kept prices low while growing have done so by sprawling. Obviously, we don't want the congestion or car emissions of a town like Houston. However, we now have the eighth largest rail system in the country. The light rail and commuter rail lines have triggered and will continue to trigger significant transit oriented development. To the extent that more residences are being built near places like 61st and Pena, 38th and Blake, I-25 and Broadway, Lone Tree City Center, etc...; hopefully that will place deflationary pressure on the higher demand areas in the urban core.

https://www.sightline.org/2017/09/21...dable-housing/

Yeah... as much as we tend to be Denver focused on the forum, some of the new rail lines will probably attract significant development that may be able to help with some of this. I know we all probably loathe the aerotropolis concept, but if it's close to the A line, I could help spur good TOD near the stops..... Same goes with the G line now that it's open, and the N line has tons of potential there with the northern stops.

[Denvergotback]

Originally Posted by laniroj

The cycle of not building enough homes continues...but at least we have thousands of new apartments at $2.25/sf or more!

Sorry in advance, my post may be a bit wordy...

Do you think any of this (with many cities) is still a lingering effect from the Great Recession? I am no expert on this at all, so please correct me if I'm wrong, but do you think that any of these cities and developers, including Denver, might be overly weary about building enough housing stock due to what happened to cities like Phoenix and Las Vegas in 2008 where thousands upon thousands of homes stood empty or foreclosed?

I just find it weird that many of these large cities can't keep up with demand but yet you find cities like Houston and Dallas that seem to be doing just fine building more homes.

I understand Houston builds sprawly and Denver wants to become more dense, but I once heard a developer tell me that its far easier to build up. If this is true on any level, then what is the real underlying problem?

[The Dirt]

Originally Posted by laniroj

Pretty pics and lots of projects coming online and yet vacancy decreased in the first quarter and rents still increased! From Ron Throupe and the vacancy and rent survey from 1Q2019...

-3,959 units delivered
-5,552 units ABSORBED
-Vacancy rate decreased from 5.9% to 5.4%
-Rent increased to $1,480.74, $24.65 higher than 4Q2018
-4.3% YoY increase

The cycle of not building enough homes continues...but at least we have thousands of new apartments at $2.25/sf or more!

Can you post a link to the 2019Q1 results? I can only find the 2018Q4 pdf.

[mr1138]

The problem with trying to prove (or disprove) that new supply is good for housing prices is that cost of housing is only one of a complex set of economic factors. Average rent seems to inch up in small increments every quarter as landlords watch the market, but that's not necessarily the same timetable as the rate in which other household budget factors change - most people don't see small quarterly raises in their income. I think anyone who watches the economy closely enough and for long enough time realizes that it doesn't grow neatly and cleanly. It grows in fits and starts, oftentimes with backslides, and different sectors of the economy grow at different rates. And as others frequently point out on here - new housing supply comes in response to existing demand, not the other way around. Many of these projects probably wouldn't pencil out if the rent they could charge went down. So if enough supply were added all at once that it singlehandedly reduced the average Metro Denver rent, this would not be good for the industry.

Now granted, oversupply absolutely DOES happen sometimes (see Miami and Las Vegas circa 2008), but my intuition tells me that this happens because nobody sees the recession coming. It wouldn't be good public policy or private business to deliberately flood the market in this way.

But back to my first point - cost of housing is not the only factor in people's lives. Other factors - like wages, the employment rate, the cost of energy, the cost of food, taxes, interest rates for a loan, the rate of home ownership etc., etc. - are all moving targets as well. Perhaps what we should actually be seeking isn't a drop in the cost of housing (possibly associated with a recession), but rather looking at where that number sits in relation to every other cost that people have in their lives. Or in other words, a reduction in housing costs could simply result from a slowdown in population growth while wages and inflation continue to go up. Of course this is entirely hypothetical, takes decades to measure or prove, and is more than a little bit optimistic.

The pessimist in me tells me that a market correction is much more likely to come in the form of a recession. And the cost of housing as a percentage of household expenses is likely to continue rising in desirable cities.

Edit: Wow - a lot of you are having similar thoughts and posted at the same time as me. I think what happened in 2008 is definitely still fresh in people's minds. It's hard to imagine the industry deliberately flooding the market with enough supply to actually drop prices. I'll need to read that sightline institute article closely though and see if it changes my opinion on this.

[TakeFive]

Originally Posted by bushw00d

Is the point of posting all these deals w/ giant pictures to infer that somehow this supply will make a dent in the demand curve for housing?

Source

I'm always delighted to recruit a new face to our crazy place so W E L C O M E.

I just decided on the fly to make a primary task of cataloging on this thread the completed projects over the 1st six months of this year. So far I've stayed on the downtown side of I-25 and I've piggy-backed on Ken's excellent every six-month summaries at Denver Infill. That means projects within a 1.5 mile radius of downtown. I also didn't include a couple of DUS projects that Ken covered well earlier in the year. If I add those in I've counted over 2,000 apartments units in the 1st six months. Obviously it will take time to rent these units up.

So far as the size of images it's actually quite hard to find one's that will fit these pages and not be 50% larger. I am one that enjoys a photo history of what's happening but nobody is required to enjoy it as much as I do.

Originally Posted by bushw00d

New projects are more difficult to pencil than any time previously in the cycle right now and, outside of a few pockets of very concentrated supply (Rino, Golden Triangle, etc) AND barring some sort of economic collapse, we won't deliver enough units in the next 5 years to meet demand let alone foster a significant softening.

That's a very fair point. Our favorite visitor mhays speaks often about cost of land and project costs going up in Seattle making it harder to pencil out new projects.

It's a bit speculative at this point but not an unreasonable projection.

[TakeFive]

Originally Posted by The Dirt

Can you post a link to the 2019Q1 results? I can only find the 2018Q4 pdf.

I wanted to check it out also so I Googled it https://daniels.du.edu/q1-report-apa...asonal-growth/

[CherryCreek]

Originally Posted by Denvergotback

Sorry in advance, my post may be a bit wordy...

Do you think any of this (with many cities) is still a lingering effect from the Great Recession? I am no expert on this at all, so please correct me if I'm wrong, but do you think that any of these cities and developers, including Denver, might be overly weary about building enough housing stock due to what happened to cities like Phoenix and Las Vegas in 2008 where thousands upon thousands of homes stood empty or foreclosed?

I just find it weird that many of these large cities can't keep up with demand but yet you find cities like Houston and Dallas that seem to be doing just fine building more homes.

I understand Houston builds sprawly and Denver wants to become more dense, but I once heard a developer tell me that its far easier to build up. If this is true on any level, then what is the real underlying problem?

Good questions, I'm not sure I've heard entirely satisfactory answers to these questions, but some of the usual responses on here include:

1. Water - can be challenging and expensive to get access to sufficient water to support massive new developments.

2. Available land - there's endless land to the east of currently built up metro Denver, but is there demand to live there? (And what about No. 1, above?). Land to the west and south is either quite expensive (south) or difficult to build on (West). The north and northeast seems to offer opportunity.

3. Costs - the high cost of living means its hard to attract and keep construction workers. This in turn leads to further escalating costs. Ironically, the problem that construction is meant to address - the need for more and affordable housing - is challenged by the lack of affordable housing for the workers who might otherwise build affordable housing.

Denver itself still has a lot of runway for development, but that seems focused on multi-family. I really hope the market eventually turns to developing more condos and town homes.

Also, as far as the risk of a housing bubble, I'v seen lots of analysts making this point:

In comparison during the last housing bubble, growth in the investment component of HPI was substantially larger, “reflecting reckless lending and speculative homebuying,” said Andrew M. Neal, Urban Institute Senior Research Associate.

“Investment-driven demand for housing returned in 2012 as buyers with strong credit profiles and deep pockets snapped up millions of foreclosed homes at rock-bottom prices,” Neal said. “Not surprisingly, peak growth of the investment component in 2013 (4.2%) far outpaced the consumption component (2.2%), although to a lesser extent than during the bubble.”

“These data should comfort those worried about another housing market crash,” said Neal. “Compared with the 2005–2007 bubble, when the HPI was driven mostly by speculative buying, the HPI today is driven mostly by families wanting to buy homes to live in.”


https://dsnews.com/daily-dose/06-07-...housing-bubble

Another interesting article focusing on Colorado, and offering similar analysis comparing 2008 to 2019:


Realtor Mike Salza of C3 Real Estate Solutions in Fort Collinssaid the housing crisis a decade ago was caused by predatory lending practices and federal policies that encouraged homeownership even for people who couldn't afford to buy.

Today, those predatory lenders have largely disappeared, loan guidelines have tightened and fewer risky loans are being made, Salza said. In May 2008, 270 homes were sold in Fort Collins. Last month, 295 homes were sold. The biggest change, Salza said, was in financing of those homes. In May 2008, 69% of loans were conventional-fixed rate mortgages, 12% were through the Federal Housing Administration, or FHA, which requires a smaller down payment, and 13% were cash.

This year, the rate of conventional fixed-rate mortgages was up to 73%, only 4% were FHA and 15% were cash, he said. That means more people were putting more money down or paying in cash, putting them at a lower risk of default.

"The number of people buying with 96.5% financing is way down, which means the housing market is healthier," he said. "It's tough to see a bubble when people are putting that much cash in."

Both Salza and Shields caution that a significant national event that throws the country into a recession could alter the local landscape.


https://www.coloradoan.com/story/mon...ts/1357138001/

[bushw00d]

Originally Posted by TakeFive

I'm always delighted to recruit a new face to our crazy place so W E L C O M E.

I've counted over 2,000 apartments units in the 1st six months. Obviously it will take time to rent these units up.

So far as the size of images it's actually quite hard to find one's that will fit these pages and not be 50% larger. I am one that enjoys a photo history of what's happening but nobody is required to enjoy it as much as I do.


That's a very fair point. Our favorite visitor mhays speaks often about cost of land and project costs going up in Seattle making it harder to pencil out new projects.

It's a bit speculative at this point but not an unreasonable projection.

Thanks for the welcome. Long, long time reader, first time caller. Similar to mhays and others, I'm involved in the world of real estate development here in Denver and generally enjoy the banter and discourse on this site. Always good to gather perspectives that vary from those deep in the weeds of the development business.

At the current pace of absorption (+/- 10k units per year 2014-2018), it will take 2.5 months to absorb the 2,000 units discussed.

Stepping back from the thought of developers intentionally or unintentionally oversupplying a market, consider the end game of all development - Does the project make money? There are varying degrees of money making as some developers VE everything to death and some are willing to spec a little more on a premium product and therefore nicer design, or some desire to build and hold vs build and sell, but at the end of the day, no investor is doing this for fun and each individual project is scrutinized for its ability to produce financial returns.

[TakeFive]

Originally Posted by laniroj

Pretty pics and lots of projects coming online and yet vacancy decreased in the first quarter and rents still increased! From Ron Throupe and the vacancy and rent survey from 1Q2019...

-3,959 units delivered
-5,552 units ABSORBED
-Vacancy rate decreased from 5.9% to 5.4%
-Rent increased to $1,480.74, $24.65 higher than 4Q2018
-4.3% YoY increase

That's impressive but normally new complexes aren't figured into vacancy for some period of time to allow for normal rent-up time of new projects. But I can't speak specifically to his methodology.

The other thing that is important to consider since this is a metro survey is the significant number of suburban projects that have sold over the last few years. Typically the new buyer's motivation is from a value-add perspective. I've know projects (in Phoenix) where buyers have done as much as $20,000 per unit in renovation plus another $2-$300,000 on the exterior of the complex. Renovated units will then rent for maybe 50% higher. This tends to skew the overall results.

Originally Posted by laniroj

The cycle of not building enough homes continues...but at least we have thousands of new apartments at $2.25/sf or more!

I've addressed this before but I'm happy to review the challenges.

Following past recessions developers rushed out to build tons of entry-level homes. I didn't happen this time for many reason which would take way to long to fully explain. In summary builders have focused (primarily) on upscale housing only.

Add in the millennial migration to downtown where the cost of land and cost of construction as well as the longer delivery time needed has meant higher and higher costs and rents.

[laniroj]

Originally Posted by Denvergotback

Sorry in advance, my post may be a bit wordy...

Do you think any of this (with many cities) is still a lingering effect from the Great Recession?...

Short answer, NOPE. There is so much money, if you lose an equity or debt partner, there are multiple waiting in the wings. Might not be as good of a deal, but there's TONS of liquidity chasing anything it can get and the deal will get done - that market has been so competitive since about 2015 it's sickening. If equity is not interested (in some random parallel universe) there are ample structured equity executions, mezzanine plays, and even hard money that is deploying in the intermediate space ($10mm-$20mm placements).

The greatest problem, as I see it in my front range-centric experience, is lack of zoned ground and lack of capacity at the municipal level. What used to take 4-5 months in the mid 2000's takes over a year now. What took a year in 2014 now takes almost 2 years (and that's if you have zoned ground). If you are rezoning, add another 1-3 years. Everyone wonders where deals go when Ken announces them, it's called the black hole of municipal employees missing their review deadlines (by months - not by days or even hours). Amazon could buy google and close in 90 days, but we can't review a $200,000 tenant finish planset in twice that time...

PS: I have no idea how municipalities hire anyone - it's an impossible workload because they're so understaffed, the only thing you ever deal with are clients yelling at you because of how late everything is, and you make half what your market rate peers make.

The problem is zoning and municipal functionality - it's not lack of capital, it's not lack of appetite for big risk. This is only half the problem though, the other half is municipalities' lack of interest in creating higher than single family or townhome residential zoning due to the commercial/residential divide created by the legislature. Some municipalities even have trouble with townhome densities!

With regard to housing affordability, I don't give a hoot about TABOR or its long term effects. The legislature could re-balance tax burdens now AND in doing so it could maybe, in a decade or so, help municipal level planning and management leaders see that commercial isn't the only type of property that can produce substantial tax dollars for their cities. Cities are whore for tax dollars which is why you'll find thousands of acres of commercially zoned land spewn throughout Denver metro that will never get a business on it.

Also, found the below article interesting - feel like I see 1 of these articles zoning articles pop up somewhere in this country every week. It's only a matter of time until the millennials rise up in socialism and nobody owns homes anymore.

Boston Globe: https://www.bostonglobe.com/opinion/...u6N/story.html

[CherryCreek]

Originally Posted by laniroj

Short answer, NOPE. There is so much money, if you lose an equity or debt partner, there are multiple waiting in the wings. Might not be as good of a deal, but there's TONS of liquidity chasing anything it can get and the deal will get done - that market has been so competitive since about 2015 it's sickening. If equity is not interested (in some random parallel universe) there are ample structured equity executions, mezzanine plays, and even hard money that is deploying in the intermediate space ($10mm-$20mm placements).

The greatest problem, as I see it in my front range-centric experience, is lack of zoned ground and lack of capacity at the municipal level. What used to take 4-5 months in the mid 2000's takes over a year now. What took a year in 2014 now takes almost 2 years (and that's if you have zoned ground). If you are rezoning, add another 1-3 years. Everyone wonders where deals go when Ken announces them, it's called the black hole of municipal employees missing their review deadlines (by months - not by days or even hours). Amazon could buy google and close in 90 days, but we can't review a $200,000 tenant finish planset in twice that time...

PS: I have no idea how municipalities hire anyone - it's an impossible workload because they're so understaffed, the only thing you ever deal with are clients yelling at you because of how late everything is, and you make half what your market rate peers make.

The problem is zoning and municipal functionality - it's not lack of capital, it's not lack of appetite for big risk. This is only half the problem though, the other half is municipalities' lack of interest in creating residential zoning due to the commercial/residential divide created by the legislature.

With regard to housing affordability, I don't give a hoot about TABOR or its long term effects. The legislature could re-balance tax burdens now AND in doing so it could maybe, in a decade or so, help municipal level planning and management leaders see that commercial isn't the only type of property that can produce substantial tax dollars for their cities. Cities are whore for tax dollars which is why you'll find thousands of acres of commercially zoned land spewn throughout Denver metro that will never get a business on it.

Also, found the below article interesting - feel like I see 1 of these articles zoning articles pop up somewhere in this country every week. It's only a matter of time until the millennials rise up in socialism and nobody owns homes anymore.

Boston Globe: https://www.bostonglobe.com/opinion/...u6N/story.html

Interesting insight, thanks. As far as the municipal government delays and work loads, I really don't get it. I would have thought cities would simply raise fees sufficiently to self-fund reasonable commercial time frames for reviews.

Perhaps they've tried that and in the tight labor markets simply can't find or keep the proper talent.