CBRE EA BLOG Deconstructing CRE

How much do transit access, proximity to downtown, and retail density influence multifamily rents?

Jul 7, 2017, 14:15 PM by Matthew Vance

In Denver, multifamily assets that are within a half mile of a train station clearly outperform those that are not, with average effective rents and revenues that are 50 bps and 60 bps higher, respectively. The group’s rent levels reflect a premium of 4.4%—despite lower occupancy (40 bps lower, on average) and lower surrounding retail density.

Transit-Oriented Development (TOD) Apartment Performance (as of Q1 2017)

TOD Performance Differences - Denver MFH

Sources: CBRE Research, CBRE Econometric Advisors, Axiometrics Inc.; Q1 2017.

Surprisingly, our hedonic analysis of the market—employing Axiometrics’ data on 447 multifamily properties in Denver, CoStar’s database of retail space and GIS data from Colorado’s Regional Transportation District—showed proximity to light rail to be statistically insignificant in influencing rents. Of course, this means that the differences must be explained by other factors:

We found that building age, distance to downtown, and local retail density play important roles in setting a given apartment building’s achievable rent. In fact, more than 53% of the performance variation across the market can be explained by these three variables:

  • Age: Every 10 years, rents decline by an effective 9.5%, all else being equal.
  • Proximity to downtown: Rents are 0.9% higher for every 1.0 miles nearer a building is to downtown Denver. (Denver’s transit-proximate buildings are 1.0 miles closer to downtown, on average.)
  • Retail density: Rents are 0.4% higher for every 100,000 additional sq. ft. of retail space that exists within a half-mile radius.