Colorado-Real-Estate-Journal_425682

Page 30 - October 16-November 5, 2024 www.crej.com Finance YOUR VISION. OUR TAILORED SOLUTION. WE ARE THE BANC FOR BUSINESS As a leading premier relationship-focused business bank, we are committed to serving Colorado with customized lending solutions, deposit products and treasury management services. YOU’RE OUT THERE BUILDING SOMETHING SPECIAL. WE’RE HERE TO HELP. CB26AD0224 bancofcal.com TOGETHER WE WIN ® © 2024 Banc of California. All rights reserved. Member FDIC. Chris Erickson EVP | Regional Manager Colorado Commercial Real Estate Chris.Erickson@bancofcal.com 303-802-8918 D enver’s real estate market has weathered the down- turn and is set to experience a strong resurgence in 2025. Sup- ported by solid economic fun- damentals, steady population growth, and high-demand sec- tors like industrial and multifam- ily, the Mile High City is poised to reemerge as a top investment target. With capital flowing back into real estate and traditional gateway markets facing persis- tent headwinds, Denver’s unique blend of stability and growth makes it one of the most attractive secondary markets for investors. The city’s diverse economy has been key to maintaining its resilience. As the U.S. economy is projected to grow 4%-5% over the next 12 months, Denver’s core industries – technology, aerospace and health care – are expected to thrive, fueling job creation and bolstering demand across prop- erty sectors. The state’s appeal as a destination for corporate relo- cations will continue to attract companies seeking lower costs and a skilled workforce, driving demand in both office and multi- family markets. High-income professionals moving into the city will further support a broad-based recovery in Denver’s real estate landscape. The city’s relative affordability compared to coastal markets and its reputation as a lifestyle destina- tion make it an appealing choice for both com- panies and r e s i d e n t s . These factors set the stage for strong performance across office, multifamily and industrial assets. The multi- family sector, which faced challenges during the downturn, is expected to rebound signifi- cantly in 2025. Colorado’s popu- lation has increased by over 15% in the past decade, and with the continued rise of remote work, rental demand remains strong. Multifamily construction starts have dropped to their lowest lev- els in 10 years, helping to sus- tain stable occupancy rates across most markets, excluding Colo- rado Springs. As future supply remains constrained, investor attention is likely to shift toward value-add opportunities and new development projects to accom- modate growing demand. Denver’s industrial market is also set for continued strength. Its strategic location as a logistics hub for the Western U.S. positions it as a prime market for distribu- tion and e-commerce firms. Even with new developments coming online, demand is projected to outpace supply, keeping vacancy rates low and rent growth steady. Investors will continue targeting high-quality logistics and last- mile facilities, particularly near key transportation routes such as the Interstate 25 corridor and Denver International Airport. The direction of interest rates will be a pivotal factor in Den- ver’s real estate outlook for 2025. While short-term rates are antici- pated to decline, uncertainty remains around the stabilization of long-term rates. If long-term rates dip below the current high 3% range, cap rates in Denver are likely to compress, driving more capital into the market and boost- ing property values. However, if long-term rates remain elevated, higher financing costs could curb some acquisition activity. Regard- less, Denver’s strong fundamen- tals should continue to attract investors seeking long-term sta- bility and growth. Despite ongoing national chal- lenges, Denver’s office market is expected to stabilize in 2025. The city’s lower costs, high qual- ity of life, and skilled talent pool make it a prime location for tech and professional services firms expanding or relocating. Growth is likely to be concentrated in high-quality buildings in desir- able submarkets like LoDo and Cherry Creek, which are drawing tenants looking for flexible, ame- nity-rich spaces to accommodate hybrid work models. Additionally, Denver’s emerg- ing life sciences sector will play an increasingly important role in office demand. With research institutions and a growing health care cluster, life sciences com- panies are seeking specialized lab and office space, presenting unique investment opportunities in this niche segment. The housing market in Denver is expected to tighten further in 2025 as strong in-migration and limited new supply continue to drive demand. The city’s shrink- ing construction pipeline, hin- dered by rising costs and regula- tory challenges, will prevent over- supply and support steady rent growth. Both multifamily and single-family rentals are antici- pated to maintain low vacancies, making the market highly attrac- tive to investors. Single-family rentals, in partic- ular, are poised to benefit as fami- lies seek more space amid afford- ability challenges in the home- ownership market. Institutional investment in single-family rental portfolios is expected to rise, as demographic trends continue to favor renting over buying. As real estate investment activ- ity ramps up in 2025, Denver is well-positioned to capture a significant share of new capital inflows. Institutional and private equity investors are increasingly focusing on secondary markets that offer stability and growth, and Denver’s fundamentals align perfectly with this strategy. Its relative affordability and high- growth potential make it a top destination for capital seeking long-term value. This anticipated surge of capi- tal will intensify competition and drive further appreciation, particularly in the multifamily and industrial sectors. Investors should be prepared for a competi- tive landscape as more players enter the market to capitalize on Denver’s improving fundamen- tals. Overall, Denver’s real estate market is set for a robust rebound in 2025. Its economic resilience, strong population growth and performance across key sectors make it an ideal choice for inves- tors. With a tight housing pipeline and stabilizing office and indus- trial markets, Denver is poised to benefit from renewed investor confidence. With a unique combination of growth, stability and relative affordability, Denver offers com- pelling opportunities for both institutional and individual inves- tors. As momentum builds, Den- ver’s diverse real estate sectors are set to deliver strong returns, solidifying its status as a prime target for investors navigating a recovering landscape. s criggins@northmarq.com Denver’s real estate market is positioned for a strong 2025 Carl Riggins Vice president, Northmarq