After a Slow Start, Stronger Growth Likely in the Second Half for Denver’s Multifamily Market

After deliveries peaked in 2024, multifamily developers remained active in Denver in the first quarter. Despite heightened levels of new development, Class A and Class B properties have performed well, with vacancy rates of 6.2% and 6.7%, respectively. In recent periods, operational challenges have been isolated in the Class C segment, where vacancies have spiked as Covid-era eviction renter protections have expired. Denver-area evictions are up more than 80% from pre-pandemic levels, with renters and operators in Class C properties hit the hardest. The Class C vacancy rate ended the first quarter at 8.9%, up 440 basis points from one year earlier, and more than 650 basis points higher than the artificial low recorded in 2022. Recent rent trends have been uneven; rents declined for the second straight period in the first quarter, the first time the market has posted two consecutive quarters of rent dips in the past five years.

Sales activity in the Denver multifamily market declined in the early months of 2025 after volumes at the end of 2024 reached a three-year high. Transaction totals during the first quarter returned closer to the limited levels recorded in the opening months of 2023 and 2024. Investors have been targeting slightly older property types to this point in the year. Assets built in the 2010s accounted for the greatest share of the transaction mix during the first quarter at 30%, and 2000s-vintage properties have made up 20% of sales. In the preceding two years, properties built in the 2020s made up the largest portion of the sales mix. The median price during the first quarter was $266,200 per unit, although properties built within the last five years posted a median price of $360,600 per unit.

Looking ahead

After posting some softer conditions in recent periods, the Denver multifamily market should begin to change course in the coming quarters. The pace of new supply growth is forecast to moderate by the end of this year, after developers delivered nearly 40,000 new units to the market since the beginning of 2023. Fewer than 30,000 units are currently under construction throughout the region, and deliveries in 2025 are on pace to decline by more than 30% compared to the peak levels recorded last year. Despite the additions of new supply, Class A and Class B properties have performed fairly well, a trend that is likely to continue as the local labor market regains momentum. The aerospace industry is expected to be a source of growth, with companies including BAE Systems, Blue Origin and Sierra Space making investments in the area that will support high-wage employment growth.

Sales activity in the Denver multifamily investment market is projected to increase in the coming quarters, tracking seasonal trends that seem to repeat during most years. Still, it may prove challenging for transaction volumes to reach historical averages, with rent growth likely to prove to be limited and interest rates remaining stubbornly elevated. The most likely result will be an investment market that closely resembles 2024. Properties built in the 2000s and 2010s should continue to account for the majority of sales going forward. Transactions involving new construction properties have cooled in response to a less robust lease-up environment, which may delay the sales of newer assets until late in 2025 or into subsequent years. While momentum in the investment market has been slow to take shape, cap rates have proven to be steady and are likely to remain in the lower-5% range.

Learn more

Contact our Denver office for more information.