Zocalo Community Development Inc. is moving forward on a 231-unit apartment tower in downtown Denver that will be even greener than the Solera apartment tower it opened earlier this year.
“I think 2020 Lawrence will be one of the greenest high-rise apartment buildings in the country,” said David Zucker, principal of Zocalo. He said 2020 Lawrence, to be built a block from Solera at 1956 Lawrence St., will be about 70 percent more energy efficient than any other built-to-code apartment in the U.S. Solera is LEED Gold certified, and it is expected 2020 Lawrence will have the same designation. LEED stands for Leadership in Energy and Environmental Design. The new building also will have almost twice as many units as the 120-unit Solera, which opened in August and is already about 40 percent leased. And because the units will be smaller at 2020 Lawrence – an average of about 840 square feet compared with 1,000 square feet in the downtown market – rents also will be less. A recent grand opening party at Solera attracted more than 700 people.
Zucker said that Zocalo will pull a building permits for 2020 Lawrence before the end of the year. The exact start date has not yet been determined, but it will take about two years to build, giving it an opening date in 2013, he said.
That should be perfect timing for an apartment building of that size opening downtown, said Erik Hagevik, acquisition manger at Zocalo.
“Hopefully, we will have more jobs downtown and the economy will be better,” Hagevik said. Solera, he said, is the last large “institutionally sized” apartment high-rise to be built downtown during this cycle. Historically, about 500 to 800 new rental units are added downtown annually, so with little new construction on the horizon, there should be a pent-up demand for 1,000 to 1,600 units, he added.
Timing for construction also is excellent, because of historic low interest rates, construction costs the lowest in at least five years, and the increasing abundance of green building materials. “It used to be that you would pay a 5 percent to 10 percent premium to build a truly sustainable, green building, but now the cost difference is negligible,” Zucker said. For example, they used to have to pay a big premium for recycled vinyl flooring, such as found in other sustainable apartment buildings. Now, the flooring is much more common, so the cost has gone down dramatically, said Zucker.
Exciting project
The long-awaited building is “really exciting,” and “reinforces a trend we are seeing of more rental rather than for-sale condo projects,” said Brian Phetteplace, manager of residential and retail development for the Downtown Denver Partnership. The development also will serve as another anchor for the fledgling Arapahoe Square area, largely a sea of parking lots and considered the most of under-utilized parts of the central business district.
“Arapahoe Square is really ground-zero for downtown,” Phetteplace said. “2020 Lawrence will help gentrify that area. We think having residents down there, whether in rental properties or in for-sale condos is great. They will shop, ear and continue to create a 24-hour environment in downtown.” Some of the tenants will turn into buyers, as their situations change, he noted.
He said the density of 2020 Lawrence is great, as well as its green features. “They showed with Solera that people are willing to pay a bit more than they otherwise for the space, for the value-added green features,” Phetteplace said. “I think it is interesting that they are taking those green features and adding to them and enhancing them. It will be interesting to watch how renters respond to it.”
Few apartments moving forward
Terrance Hunt, an apartment broker with Apartment Realty Advisors, on Thursday said only about 1,000 building permits will be issues this year in the Denver area for new apartment units, which means that 2020 Lawrence will account for a large percentage of multi-family construction in the coming 18 to 24 months.
“The ones that can really get off the ground will be fine,” Hunt said. “If you are coming out of the ground in the near future that means that they will be able to accommodate the demand that nobody else will be able to meet. Two years ago, people were a little hesitant about the downtown rental market. Was Spire going to go rental? Were rental rates going to go down? Now, we are seeing so much more demand downtown that it is blowing away everyone’s expectations. It is the place where young professionals want to be. Downtown really is the strongest apartment sub-market.”
Phetteplace said there are already signs that downtown’s rental market is improving. “Landlords are already burning off incentives,” he said. “Look at 1600 Glenarm, where they have invested $4 million in improvements, and the rental demand is very strong. Downtown’s housing is about 70 percent rental and 30 percent owner-occupied. It makes sense in this market to have more rental come on line, rather than for-sale projects.”
Initially, Zocalo was planning a 60-unit, for-sale condo on the 2020 Lawrence St. site, which Zucker said is not occupied by surface parking and a vacated building. Denver architect John Gagnon, of JG Architects, will design the E-shaped rental building. Gagnon also designed Solera. Shaw Construction will be the general contractor at 2020 Lawrence. Principal Real Estate, the primary owner/investor of Solera, likely will sell Solera once it is considered “stabilized,” which likely will occur in the late spring or early summer of next year.
Stars align for rentals, not condos
Economic and social demographics favor an apartment building,over condos, Zucker so-called Gen-Y and Gen-X consumers are getting married and starting families later, so they put off buying homes. In addition, many of them are gun-shy about buying homes, considering the crash of the housing market. Also, they tend to be very social, so 2020 Lawrence, like Solera, will be built to encourage gatherings of renters.
2020 Lawrence will have 10 stories, as opposed to 11 stories at Solera. It will cost “something less than $60 million,” to build, while Solera, with almost half as many units as 2020 Lawrence. Zocalo is looking to the U.S. Department of Housing and Urban Development for the lion’s share of the financing for 2020 Lawrence. Wells Fargo Multifamily Capital, an approved HUD MAP-lender, is processing and issuing the HUD financing. Jennifer Quigley, a Wells Fargo’s vice president, has been working with Zocalo to get the HUD financing. “Jennifer and her MAP lending team, have been excellent and should be lauded for their efforts to get this loan processed in a timely manner,” Hagevik said.
The HUD loan would cover about 80 percent of the cost, and Zucker has lined up the remaining financing from investors. Zucker has been working closely with Wells Fargo and the HUD Region VIII staff on the financing. “The HUD staff has been great to work with,” Zucker said. “They have been very supportive of the sustainable features.” Region VIII Director Rick Garcia has made construction sustainability and green building a primary focus since being appointed to HUD. Earlier, he told InsideRealEstateNews that he hopes that will be a legacy that will change the way HUD conducts business. A spokeswoman for HUD said that Garcia is in a meeting today and, in any case, he may not want to talk about a specific, potential loan.
2020 Lawrence will include a rooftop deck that will include a fitness center, yoga stretching studio, dog-walking area, large outdoor seating area, barbecue/bar area, and potentially a greenhouse powered by a heat-shed from the building.
“We’re going to have a hot tub on the roof, too,” Hagevik said. “We’re going to try to have it heated by solar panels.” Overall, 2020 Lawrence, due to its large roof deck, will sport far more solar features than 75 kilowatts of solar production, as compared with 25 kilowatts at Solera.
The building will also feature a cutting edge heating and ventilation system by Daikin Industries, which also will go a long way in making 2020 Lawrence much more energy efficient than other downtown apartment buildings.
There will be 9,100 square feet of commercial space on the ground floor of 2020 Lawrence. One space will likely be occupied by a bike shop. They are talking with Wheat Ridge Cyclery about taking that space, which likely would include a bike repair shop and storage area, in addition to a retail store. The remaining space likely will be home to restaurant.
Other highlights:
- Units ranging in size from 475 square feet for a studio, to a two-bedroom, two-bath with 1,152 square feet.
- Monthly rents from about $900 to $2,000, compared with $1,100 to about $2,900 in the downtown market..
- All common areas will have WiFi connections.
- A community area on the street level that will likely include a demonstration kitchen, flat screen TV, sound system, and interactive gaming area, MacBar/I-Pad station, which will have Macs and PCs available for tenants.
Increasingly, young people will be drawn more to sustainable buildings, such as 2020 Lawrence, Zucker said.
“When I was attending the Wharton School ( at the University of Pennsylvania), I had to take classes in business ethics,” Zucker said. “Now, kids are taking classes in sustainability. It is very much part of their college.”
And it’s just not about saving the environment. Research shows that people who work in green buildings are much less likely to get sick, and are more productive, Zucker said. ”You spend at least as much time in your home, as you do in the office,” Zucker notes. At Solera, which is 60 percent to 70 percent more energy efficient than a typical, modern apartment building, tenants save an average of $50 to $60 a month, or about $700 a year, on their heating and cooling bills. The goal, at 2020 Lawrence, is for tenants and the building to save more energy than at any other building constructed in downtown Denver.
Zucker said that some tenants will be drawn to 2020 Lawrence, because they are tree-huggers.
“Some people may move there because they want to save the environment,” Zucker said. “But I think we can all agree we want to save money.”
