Multifamily Sector Begins to Stabilize Despite Challenges
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Supply Outpacing Demand - Rent Growth Slows
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Fort Collins/Loveland/
Larimer County
The Larimer County submarket has an inventory of 26,979 units or 548 existing buildings, up 2.3% from the prior period, with 1,899 units currently under construction. 12-month net absorption is down 34% from Q2 2022. The vacancy rate sits at 4.8%, only a 0.2% increase from the prior period. Occupancy levels however are on the rise, sitting at 95.25%.
Annual rent growth is down significantly from Q2 2022 which saw rent appreciations of 8.9% from the previous period. Annual rent growth from Q2 2022 to Q2 2023 was only 3.1%. Even with the slow down in rent growth, market rent per unit is at an all time high of $1,574 per month. Market rent per unit is anticipated to rise throughout the remainder of 2023 with the projected rent per unit on track to reach $1,695 by the end of the year or a forecasted year over year appreciation of 10.6%. Three-bedroom units command the highest rental rate per month, where studios have the highest market asking rent per square foot.
The 12-month sales volume topped $549 million as compared to $533 million in Q2 2022. Market cap rates are at an all time low of 4.35%, reaffirming multifamily remains the preferred investment in the submarket. The market sale price per unit is $251,292, the highest price per unit of all time, which is a 6.8% increase from the prior period. Total sales volume for 2021 and 2022 was $1.4 billion in the submarket, which is equivalent to the total sale volume for 2014-2020.
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Greeley/Weld County
The Weld County submarket has an inventory of 19,692 units or 419 buildings, up 7% from the prior period. There are currently 1,636 units under construction, a 23% decrease from the previous period. 12-month net absorption is down 44.1% from Q2 2022, at 387 units. The vacancy rate increased 4.1% from Q2 2022, which now sits at 11.6%. Occupancy levels are at an all time low of 88.43%, signaling a potential over supply of units.
Annual rent growth is on the rise, with a 2.3% increase from the prior period, with a market rent per unit of $1,470, a record high for the submarket. Due to the explosive growth in population in Weld County over the past few years, market effective rent per unit is forecasted to increase year over year through 2027. Like the Larimer County submarket, three-bedroom units achieve the highest rental rate per month and studios demand the highest market asking rent per square foot.
Market cap rates crept up slightly from the prior period to 4.98%, with a 12-month sales volume of $90.3 million, down significantly from Q2 2022, which had a 12-month sales volume of $212 million. The market sale price per unit is $197,117, a minor decrease of 1.5% from the prior period.
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Uncertainty Breeds Inaction
The difference between what buyers want to pay and what sellers are seeking, has become a wide spread. The slow down in sales won’t be resolved until buyers and sellers adjust their views on valuation and meeting somewhere in the middle. To build on the divergence in valuations, there are much more willing buyers than willing sellers in the market; many potential sellers are holding off while they wait for a better time to sell.
Still "Preferred" Investment
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Realtec is here to help navigate the changing market
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CoStar Market Reports - Larimer and Weld County
Q2 2023
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(970) 346-9900
1711 61st Street, Ste. 104
Greeley, CO 80634
Lanny Duggar
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(970) 229-9900
712 Whalers Way, Bldg. B, Suite 300
Fort Collins, CO 80525
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(970) 593-9900
200 E. 7th Street, Ste. 418
Loveland, CO 80537
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This quarterly publication is authored by Jamie Globelnik of Realtec Loveland
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