It’s no secret rental apartment availability in Denver is going to remain tight as we approach Summer 2014, but for renters in need of more space (3+ Bedrooms), good luck. Only a small number of apartment communities offer three bedroom rentals and that inventory moves fast. New developments in the lease-up phase only offer two bedrooms with an average size of just 1,100 square feet. The scarcity of three bedroom or larger rental apartments is a golden opportunity for Real Estate Developers to capitalize big, and long-term, by developing large luxury rental properties in downtown.
A big obstacle in downtown Denver’s future of real estate development is sorting out the litigation woes developers face as condo owners file class-action suits for building defects. But developers and investors can still employ a winning strategy long term – build bigger and better. It’s easy to recognize which new luxury properties will likely convert to condos in 8 years because of their high quality construction and finishes (a rental property must remain a rental residence for 8 years before converting to a condo in Denver). Unfortunately, even these properties are only offering up to 2-bedroom size homes – some have a den or home office but big whoop. That doesn’t satisfy the need for those seeking to grow their family or who desire a large home in downtown.
Developers take note, there is no shortage of rental clients who desire and can afford these larger rentals. Sure, equity is good when you own, but some desire the amenities and conveniences that only a rental can offer (no maintenance or yard work, Concierge services and state of the art in-house amenities). Many of these renters won’t even consider a property that is less than 1,500 square feet. Add views, a terrace and a home that welcomes furry friends and you have a major challenge – no inventory.
When I worked in Manhattan as a Rental Broker, many of the buildings I worked with offered renters the ability to install a non-structural “pressurized” wall, a temporary room divider essentially, where roommates or families would often cram into these apartments and sacrifice living space just to have a place to sleep. While I don’t see the infamous Manhattan “convertible 3 bedroom” apartments invading Denver, renters seeking extra large apartments are typically limited to privately owned lofts, condos and townhouses. The only winners right now are the homeowners and investors who have Denver Rental Brokers representing their properties for lease and are achieving record-setting rental rates for their highly sought-after homes.
It’s difficult to see people leasing an apartment and using the den or home office as a bedroom for a family member or roommate. Typically these spaces are referred to as “non-conforming” bedrooms, meaning the room has no windows, thus, better used for anything other than a bedroom. Who wants to live in a cave? Even worse, some new rental communities are’t even building bedrooms that can accommodate a king-size bed.
So real estate developers in Denver, what’s the scoop on the lack of three bedroom rentals?