February 3, 2026

Fundamentals set to improve with cooling supply in the Denver multifamily market

Q4 2025

Denver multifamily market overview

After posting mostly steady performance during the first nine months of 2025, seasonal factors resulted in softening property fundamentals in the Denver multifamily market during the fourth quarter. Vacancy increases, rent declines, and a cooling pace of renter demand during the closing months of the year have been common in Denver for the past decade, but the recent downturn was more pronounced than in prior years. These seasonal trends were amplified by steady levels of new inventory, with more than 14,400 units coming online during the year. However, not all submarkets moved in the same direction. The Thornton/Northglenn, Aurora South, and Westminster submarkets all posted annual vacancy improvements in 2025, defying the broader softening trend. Vacancies in these three submarkets combined to average approximately 6.2%, significantly tighter than the metro average.

Multifamily investment activity moderated during 2025, with the transaction count falling approximately 16% year over year and trailing the five-year average. Despite this contraction in deal flow, pricing metrics stabilized; the median sale price inched higher to $286,800 per unit, though values remain roughly 16% below the market peak observed in 2021. Values for Class A and Class B properties trended higher in 2025, though the Class C segment faced continued headwinds, with pricing dropping to a median of $167,100 per unit. Institutional capital was concentrated in stabilized suburban pockets, particularly in South Douglas County and the Lakewood/West Corridor. Sales volume in South Douglas County doubled to $561 million across six transactions, driven by sales of large, stabilized assets. Meanwhile, the Lakewood/West Corridor recorded seven sales totaling $528 million, with pricing holding firm at roughly $322,750 per unit. Momentum accelerated in the second half of the year, outpacing the lows of 2023, while a 16% increase in trades of newer vintage assets helped lift overall market pricing.

Looking ahead

The soft conditions recorded during the fourth quarter of 2025 offset some of the stabilizing forces that were recorded across the multifamily market over the first nine months of 2025. Much of the recent performance can be attributed to seasonal forces and not a correction in market direction that will carry over into 2026. In addition to some seasonality, market fundamentals were influenced by continued supply-side pressures. These should ease going forward and the outlook for 2026 points toward a modest recovery. The construction pipeline has already begun to thin, and deliveries are forecasted to drop off significantly compared to the elevated levels from 2023-2025. As this pressure lessens, the market is positioned to work through existing inventory, leading to the market’s first annual vacancy decline since 2021.

Multifamily sales activity is projected to maintain its current trajectory through 2026, with the number of transactions remaining modest and the deal mix continuing to favor mid-tier assets. While overall investment activity was limited in 2025, the market generated positive momentum in the final two quarters of the year, characterized by a pickup in transaction counts and an increase in total sales volume. This late-year acceleration suggests that investor confidence is beginning to return to the market. Some improving operating conditions in 2026 could catalyze investor activity over the next 12 to 24 months. This recovery will likely be most pronounced within the Class A segment, which stands to benefit directly from slowing supply growth and may begin to capture a greater share of total transactions, mirroring trends seen in previous peak years. Conversely, Class C assets may continue to lag in the transaction mix in the near term.