As a consumer, it’s easy to celebrate the lower prices at the pump caused by falling oil prices. But will lower oil prices be good news or bad news for Denver’s apartment market?
Good news: Lower fuel prices should have a deflationary impact on most commodity prices. It’s also putting downward pressure on foreign oil-producing economies. Both of these results should help keep interest rates lower in the U.S. Low interest rates help bolster apartment values by keeping CAP rates low.
Bad news: Lower oil prices could have a negative impact on exploration and fracking. Denver is a major hub and employment center for such companies active in Colorado, Wyoming, and North Dakota. Should those companies lower salaries or reduce workforces, Denver’s apartment occupancy could take a hit – especially impacting the 19,000 new apartments currently under construction.
Which way will it go? Well, we can’t predict the future, and our crystal ball is a bit fuzzy. But this will be an interesting story that we will closely follow in 2015.
Greg Johnson and Kyle Malnati
Madison & Company Properties
1221 South Clarkson Street, #300
Greg Johnson and Kyle Malnati specialize in the sale of Multifamily buildings in Central Denver’s distinct neighborhoods (Capitol Hill, Congress Park, Uptown, and Washington Park).