Denver and the country as a whole are seeing very high levels of new apartment construction. Lenders have absorbed a glut in the office market, but they may not be able to handle an apartment glut. The verdict is out on whether tenants will be there to fill all the units.
Tenants are now requiring only 60% to 70% of the office space that they needed in 2019 because of the shift toward remote work that accelerated during the pandemic. Although more companies want staff to return to the office, it typically is only for a few days a week, reducing the amount of overall space needed.How is that possible? The office vacancy rate nationally was 17.
That number includes about 2.12 million square feet in Denver, with nearly a third of that coming in a single project, 1900 Lawrence St., a 720,000-square-foot building near the old Greyhound bus station, which is A little more than $900 billion in debt tied to commercial real estate is coming due this year and needs to be refinanced. Next year that total drops below $600 billion and the year after to around $450 billion.
That means more absorption, or people moving into new and vacant apartments once they hit the market. But the market’s ability to continue to fill new apartments will be tested in 2024 and 2025 as even more supply comes online. That total includes covering a shortage of 600,000 units from underbuilding during the Great Recession, Walter said during a presentation at NAREE. Dallas, Houston, New York, Phoenix, Austin and Atlanta face the greatest shortfalls.