The luxury apartment construction boom is ramping up another notch this year in many cities, but it may have peaked inside Denver city limits, according to a new report from RentCafe and Yardi Matrix.
In 2012, high-end apartment buildings represented about half of the total built in the country. Last year, that share had risen to 79 percent, or 1,270 out of 1,600 buildings. In the first half of this year, 87 percent of new apartment projects with 50 or more units were high-end.
In the city of Denver, the share of new construction devoted to luxury apartment buildings is actually moving lower, from 96 percent in 2015 to 88 percent of the total last year to 83 percent in the first half of this year.
Faced with high construction costs, a limited supply of urban lots, and continued demand for rentals, developers have focused their efforts on apartments with nicer amenities that can command higher rents and a higher return.
But rising rents are straining household budgets. About a quarter of metro Denver households pay half or more of their monthly income to cover the rent.
Just under a third of all the apartments in the city of Denver are now high-end, the ninth highest concentration in the country. Nationally, about 23 percent of the stock of apartments is on the top end, according to Yardi Matrix.
The surge in luxury units downtown and the dearth of affordable ones elsewhere is pushing up rents on the lower end of the market and pushing down rents on the high-end. The gap between the two historically runs 50 percent, but it is now down to 25 percent, according to David Pierce, a market analyst with CoStar Group.