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Sales of Denver-area apartment properties are expected to continue the rest of 2008 because of the market's diverse economic base, but to slack off because the debt crisis has "thinned the pool of qualified buyers," according to a Marcus & Millichap Real Estate Investment Services Inc. report."

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Transaction velocity has maintained a steady pace during the last year, fueled by Denver’s healthy long-term prospects,” Adam Christofferson, Marcus & Millichap’s regional manager for Denver, said.

High foreclosures of for-sale housing also have helped the local apartment market, keeping would-be homeowners in rental housing, the report said.

The local apartment vacancy rate is expected to end the year at 6.5 percent, an increase of 20 basis points over 2007, because completions of new apartment properties outpace renter demand. A basis point is one-hundredth of a percentage point.

But investors are buoyed by the higher apartment rents expected for the year, despite higher vacancies.

Asking rents are expected to rise — 3.5 percent to $918 a month on average. Effective rent — the actual rent paid by the resident after discounts — is expected to end the year up 3.7 percent to $804 a month on average.

“Solid rent growth prospects continue to drive apartment property valuations higher in the Denver metro area, as median sales price has appreciated 12 percent to $76,200 per unit over the past year,” the report said.

Through the end of the year, Marcus & Millichap expects sales activity to continue to ease up, because tighter underwriting criteria have cut down on the number of active buyers. But institutional investors with cash will continue to look at purchasing the highest-quality apartment assets, and local investors will look for problem properties selling at bargain prices.

Investors looking for stable properties may seek assets in downtown Denver, where the Lower Downtown area especially continues to attract increasing renter demand and some of the market’s highest rents.

Other Denver-area apartment market data in the Marcus & Millichap report include:

Through the third quarter, apartment inventory increased .7 percent — 1,200 units — from the same period of 2007.

Developers are scheduled to complete 2,600 new apartment units in 2008, which is well above the metro area’s five-year average and a 1.6 percent increase this year over ’07.

Construction activity is projected to increase, with nearly 4,500 units under construction and another 9,000 new units planned.

Capitalization rates for apartment transactions averaged in the high 6 percent range in the last 12 months, up roughly 30 basis points from the previous 12-month period.

Marcus & Millichap, based in Encino, Calif., specializes in commercial real estate investment, closing more than $20.7 billion in deals in 2007.

Author: Denver Business Journal