West Colfax Frenzy

Real estate development around central Denver is as hot as ever, and investors are constantly on the lookout for undervalued, under-developed lots to exploit for their next construction project. But until recently, even close proximity to light rail wasn’t enough to get the attention of builders in one central Denver neighborhood.

For the last decade, West Colfax Avenue provided a firebreak from gentrification in the popular Sloan’s Lake neighborhood. While new duplex and other multi-family projects sprang up around the lake, the south side of Colfax – just three blocks from the “W” light rail line – was a pariah. That is, until the former St. Anthony Hospital redevelopment started to take shape. With the opening of a handful of new restaurants and brew pubs, all in walking distance from several light rail stops, the development wildfire has jumped the road, engulfing all of West Colfax and creating the next hot neighborhood.

“When you see anchor restaurants like Tap & Burger, Little Man Ice Cream, Alamo Draft House and Cinema and more, you start to think differently about an area we may not have considered even just a few years ago as a place we may want to live,” says Krista Paul, an entrepreneur and real estate investor.

Paul and her husband, Jeff Macco, currently live in the popular Lower Highlands (LoHi) neighborhood and are in the planning stages of building a new four-unit townhome project in their adopted West Colfax neighborhood.

“We think it is today where LoHi was 10 years ago,” Paul says.

Since the early 2000s, the neighborhood around Sloan’s Lake has been a hotbed of redevelopment, fueled, in part, by zoning regulations that encourage more density on lots currently occupied by older single-family homes. But favorable zoning alone couldn’t get builders interested in crossing to the south of a still-seedy Colfax Avenue. Even the introduction of light rail wasn’t enough to turn builders’ heads. But by 2006, Peter Park, Denver’s then-director of planning, was scrapping the city’s patchwork zoning code and laying the kindling for what would become a rebirth in many of Denver’s oldest neighborhoods.

Park, who oversaw a zoning code rewrite in Milwaukee before coming to Denver, focused on creating transit-friendly zoning that increased density and lowered parking requirements for residential development the closer you got to public-transit opportunities. The uniform planning, called “form based” zoning, gave builders a predictable basis to invest in sagging communities. The game then became finding run-down single-family homes on lots that allowed multi-family development. Residential zoning codes such as U-TU, U-RH and G-MU became the gold standard for entrepreneurial builders looking for opportunities, with the latter two allowing double the number of homes than lots with the Urban-Townhome (U-TU) designation.

Until relatively recently, this area between Colfax and Lakewood Gulch was filled with older single-family homes on lots zoned for much higher density. The promise of a St. Anthony redevelopment was enough to bump prices of homes in the Sloan’s Lake area, and as new stores and restaurants come on line – many of them reshaping the face of Colfax – developers found their way across the DMZ that is Denver’s most famous thoroughfare.

"The heat around light rail moved very slowly in Denver,” says Stephen Lapham, manager at Gallup Development LLC. “The momentum finally caught up. The St. Anthony infrastructure was slow to build, but there is enough now so people feel sure it’s going to stay; it’s taken time to gather momentum.”

Builders are now clamoring for properties with the Row Home and Multi Unit zoning codes that allow four, or even five homes, on a 6,250-square-foot lot. Most have given up searching the real estate listing services and now knock on doors and carpet bomb homeowners with mailed solicitations to buy their home for cash. For a brief period, demand was so strong that wholesalers would offer three times what longtime homeowners originally paid, then market the home at 10 percent or 15 percent more to builders willing to close quickly with cash. In many situations, the wholesaler would close both the purchase and resale simultaneously so the wholesaler never had to put up any cash. This kind of churning doesn’t last long before homeowners catch on and start pushing up the prices without help from speculators.

“We stepped in just as the market went nuts,” Paul says. “We went in thinking we could get something in the 1200 block of Raleigh, Stuart or Tennyson for the mid $300s”

The residential zoning on the 1200 block of those streets, much of it G-MU (General urban-Multi Unit) allows the highest density in the neighborhood and is some of the most sought-after in the area. Prices quickly escalated into the mid $400s and beyond, with some lots selling for more than $500,000. Investors went on a feeding frenzy, snapping up most of the homes from those willing to sell, and leaving the rest wary of solicitors promising big money for their homes.

“We searched for about five months before we found a suitable property, and this was not just responding to properties that fit our criteria on the MLS (Multiple Listing Service),” Paul says. “We physically knocked on doors in the neighborhoods we desired, mailed letters to owners, and used other methods in the neighborhoods to connect with owners.”

Another big motivator — and possibly the most important — is affordability of the finished product. By shoe-horning more units on smaller lots, builders squeeze down the per-door cost of the land and the overall cost of each unit. The challenge for architects is designing something that maximizes livable floor space within the constraints of the zoning code. Once a formula is discovered, the design is stamped out with almost tract-home repetitiveness until it becomes a trademark of the region. The Denver Square is the now-charming example of the architectural response to the zoning code during one of Denver’s population booms. Today, designers working on the popular multi-family genre are riffing on a modern, cubist design with a mid-century flair. And like the Denver Square, it’s becoming an architectural trademark that city planners are trying to shake off.

“We’re sensing a move in Denver to get away from the standard slot house, and we’re trying to respond to that,” says Dan Rotner, principal at RHAP Architecture and Planning. “We’ve pushed for something that fronts the street, but they all have rooftop decks, three stories and the other common element of a living room, dining room and kitchen on level two.”

Rotner is known for his ability to elegantly maximize space with an eye on the budget. The “slot home” is designed with entries that face the side of the lot, rather than the front, with a drive isle leading to garages. His team has designed four projects in the neighborhood since 2015 totaling nearly 30 units, with three of them about to come out of the ground and even more on the drawing board.

“There’s a push to provide smaller, more affordable units with one parking space,” Rotner says. “I think that people doing development work see it as marketable because of access to transit.”

With affordability a key concern in Denver’s real estate market, demand for new homes in this neighborhood should remain steady. Attached homes around Sloan’s Lake are currently going for $375 per-square-foot, up to nearly $1,000 per-square-foot. South of Colfax they’re topping out at about $400 per square foot and units are smaller, generally ranging from 1,200 to 1,500 square feet. Today, construction is clogging the neighborhood north of Lakewood Gulch as builders ride the wave of a hot market in a hot neighborhood.

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Steve Titus worked as a reporter and freelance journalist for local and national magazines while simultaneously starting a career in real estate. For six years he wrote the award-winning "Who Owns Colorado" feature for ColoradoBiz. He is currently a licensed general contractor and owns Titus Development, a real estate development company with several projects under way in Denver, and is a licensed real estate broker with RE/MAX Alliance. He can be reached at [email protected] or 303 229-8474