As median home prices continue to grow across the front range and supply remains low, more residents have sought to rent versus own, making multifamily a hot investment in Colorado. The median home price in the Denver Metro area recently surpassed $600,000; up 5.56% from last year and the median home price in Fort Collins has crept up to $433,000; a 9% increase from one year ago.

Since the recovery of the Great Recession, multifamily has become one of the most attractive types of commercial real estate investments due to the steady cash flow from tenants. The average five-year cash flow of multifamily projects in the NCREIF Property Index is 8.58%. Rents have also kept pace with inflation as year-long lease terms allow for adjustments in rent as market conditions improve. A shift in demographics to younger tenants have helped keep demand high, and results in the continual increase in rent and property values each year.

Sources: Redfin, Origin Investments

In recent years, investor demand has increased for older Class B and Class C multifamily housing as the properties can be managed without major renovations, making them profitable investments. This summer, View Apartments, a 50-year-old property, comprised of 288 units in Northglenn, Colorado was acquired for $38 million or $131,944 per unit.

Investors also remain interested in top-tier apartment complexes. The Alas over Lowry, a 300-unit property built last year, sold for $105 million or $350,000 per unit at the beginning of September. The Connor Group paid more than a 35% premium to the average per-unit property sale in Denver, which is roughly $257,000 per unit. In the last decade, apartments have been able to close the luxury gap by offering modern designs, multiple on-site amenities and green spaces, which satisfy many of the needs that once drove condominium demand.

The student housing investment market has become extremely attractive over the past decade, with investments tripling since 2014, to $11 billion in 2019. Confidence in the long-term prospects of the sector remain strong even through COVID-19 as enrollment continues to grow. Universities have made their on-campus housing less dense, resulting in more demand for off-campus rentals as students want to remain close to campus, even with classes being offered mostly online.

The ongoing effects of COVID-19 has not left the multifamily industry unscathed. September saw the lowest percentage of renters paying rent since April of this year, signaling a slow deterioration in the financial strength of the rental market. Per CoStar News, 76.4% of the 11.4 million renters across the country tracked by the National Multifamily Housing Council paid in full or partially in September. That equates to more than 552,000 fewer renters than those who paid in September 2019 or a 4.8% drop. A recent survey conducted by the U.S. Census Bureau reported that 15.3% of renters said they were not paid up on their rent and 25% said they have no confidence they'll be able to pay rent next month.

Source: CoStar News, U.S. Census Bureau