MARKET SNAPSHOT
Increasing borrowing costs, stricter lending requirements, and a slowdown in rent growth have driven multifamily construction activity in Colorado Springs to its lowest level since 2017. By the end of 2024, only 1,661 units were under construction, representing 3.0% of the existing inventory—comparable to the national average. This marks a significant decline from the 2022 peak, when construction activity accounted for 17.5% of inventory, with over 8,200 apartments in the pipeline. Multifamily starts saw an even sharper decline, dropping 75% in 2024 to just 570 units—the lowest level in over a decade. Consequently, annual completions are expected to fall by approximately 85% in 2025, paving the way for improved market fundamentals.
Developers have concentrated their efforts on West Colorado Springs, an area with below-average rents, which is expected to see about half of the new completions in 2025. The North and Northwest Colorado Springs submarkets will account for nearly all remaining completions in the coming year. These submarkets, which have experienced a high concentration of recent new supply, currently have occupancy rates near the market’s overall average and are projected to remain stable in the short term. Moreover, the shrinking construction pipeline is expected to support occupancy gains once again as competition from new developments decreases.
Population growth over the past year, coupled with fewer military relocation assignments, has driven stronger apartment demand, resulting in the absorption of 3,674 units in 2024—marking an all-time record high and over a 50% increase from 2023. Although absorption has still been outpaced by new supply recently, the market’s overall stabilized occupancy rate remained stable in 2024. Furthermore, the supply and demand dynamic is improving substantially as the construction pipeline decreases rapidly, which, along with the metro’s growing population, will support increase occupancy rates later this year.
In a positive development for owners and property managers, demand within the middle-tier segment has rebounded, with 850 units absorbed over the past year. Previously impacted by rising rents and inflation, this renter segment had faced declining household formation, which negatively affected the broader multifamily market. However, with inflation moderating, household formation is expected to recover, particularly in more affordable markets such as Colorado Springs.
Southwest El Paso is projected to continue outperforming, with average occupancy expected to rise to 93.8% by the end of 2025. Meanwhile, East Colorado Springs, the only submarket currently below the 90% occupancy threshold, is anticipated to see improvements as no new completions are expected in 2025, allowing occupancy rates to climb back above 90%.
While the surge in new supply over the past two years has exerted downward pressure on average market rents, this impact is expected to diminish rapidly as the construction pipeline continues to contract. After eight consecutive quarters of declining rents, the Colorado Springs market is projected to return to positive rent growth by Q2 2025. With an average rent of $1,454, Colorado Springs remains a relatively affordable option along Colorado’s Front Range, and its affordability continues to drive demand. Elevated renter demand, fueled by population growth and an expanding employment base, combined with drastically declining development activity, is expected to support this rebound. Additionally, reduced new competition should lead to fewer concessions in the market, further supporting rent growth. The current forecast calls for rents to increase by 2.8% annually in the final quarter of 2025.
While most submarkets experienced rent declines over the past year, areas with lower rents and limited new supply saw smaller decreases. Southwest El Paso County, offering some of the market’s most affordable rents, was the only submarket to achieve annual rent growth, posting a modest 0.7% increase. However, all submarkets are projected to see rent growth in 2025, with the strongest performance expected in North Colorado Springs, where average rent gains are anticipated to exceed 3%.
12-month period ending November 2024
The Colorado Springs multifamily market is set for notable shifts in 2025, driven by evolving development trends, strengthening renter demand, and improving supply-demand dynamics. As an affordable alternative within Colorado’s Front Range, the market continues to attract new residents. Bolstered by this steady population growth and a slowdown in military relocation assignments, the market achieved record net absorption in 2024. Demand is expected to remain strong in 2025, with net absorption forecasted to surpass 2,500 units, further reinforcing market stability.
As demand continues to outpace new supply, rent growth is projected to resume by mid-2025, signaling a transition to a period of slower supply expansion but stronger fundamentals. With reduced competition from new developments and rising demand, the market is well-positioned for a recovery, with expectations of improved occupancy rates and a gradual return to positive rent growth. These factors suggest a favorable outlook for property owners and investors seeking long-term stability in the Colorado Springs multifamily sector.
