Developers are snapping up parking area in downtown Denver for record rates. Greystar is preparing an 11-story complex at the website of this former car park at 1800 Market that it purchased for $20.7 million this year.
Rising demand for business real estate and a limited supply of available land is driving surface car park in downtown Denver to sell at record rates as developers look for tasks that won’t be restricted by existing buildings.
In many cases, investors excited to establish ground-up houses to catch growing interest from occupants are paying higher rates for empty parking area than they are for existing multifamily buildings outside the downtown core.
“There’s a pattern line of rate boosts based upon demand, and that need is concentrated on the urban core,” stated Chris Cowan, a Denver-based vice chairman at ARA, A Newmark Business, who specializes in land sales for multifamily advancement.
Denver is just one example of a parking area need across the nation. With available advancement plots ending up being progressively scarce in nearly every significant U.S. city, car park are seen as prime locations for advancement that profit from the levels of activity and walkability, real estate specialists stated.
Business that deploy capital want to go where the demand is which suggests following millennials and active adult populations who are drawn to busy metropolitan locations across the country, including Denver, Cowan stated.
Most just recently, the sale of a 1.15-acre parking area at the corner of 18th and Market streets in Denver’s Lower Downtown location cost $20.7 million, or $413 per square foot, according to CoStar.
At that cost, the lot sold for about $35 more on a per-square-foot basis than Westend, a 390-unit apartment complex at 3500 Rockmont Drive, approximately a mile away.
The lot at 1800 Market was purchased by South Carolina-based apartment designer and manager Greystar, which has strategies to build an 11-story complex there. And just on the other side of Market Street, Elevation Advancement Group in 2017 bought a similarly sized lot for $22 million with strategies to develop a mixed-use job.
Parking lots are appealing to developers for a basic reason, Cowan stated: They offer the course of least resistance.
With a surface area parking lot, it’s a lot easier for developers to theorize exactly what the construction costs and ultimate return will be than it is when there’s an existing building on the home. Unlike existing buildings, parking area provide no existing leases to buy out, no historic preservation possibilities and no possible surprises throughout demolition, he said.
And as the land around Denver Union Station in downtown has been gotten following the redevelopment of the historical transit center in 2014, rates for the couple of parcels that are left have climbed up rapidly, Cowan said.
In less than 10 years, he stated, normal prices for land near Union Station shot up from about $100 per square foot to $450.
While parking lot sales and rates are increasing, investors’ interest in existing properties still outmatches the marketplace for car park. An affiliate of property investment management firm Heitman bought an office complex at 1401 Lawrence St. in the downtown area in December for a record $723 a square foot, according to CoStar.
House advancement in the Denver area, particularly in locations like the historic district of LoDo, local shorthand for Lower Downtown, skyrocketed after the recession and has remained consistently high for numerous years as young workers are increasingly trying to find places to live close to their workplaces rather of commuting from the residential areas.
In the downtown and Cherry Creek submarkets of Denver, more than 8,000 units have provided considering that the start of 2015, and more than 6,500 units are currently under construction, according to CoStar information.
And, driven by increased need and an increase of new item with high-end surfaces and amenities, rents have actually shot up as well, making home advancement an appealing prospect.
In between 2007 and 2017, typical rents in the Denver home market increased 52.1 percent, according to a current report from industrial property company Avison Young.
And while there has been talk among brokers in the Denver market about slowing in the multifamily sector, Avison Young’s report, in addition to one recently launched by CBRE Group Inc., suggest that the correction coming to multifamily will result in a “soft landing” instead of a crash, suggesting that Denver’s unassuming parking area might remain the target of designers well into the future.