Denver Class B Apartment Market Trends: Focus on Workforce Housing (2022-2025)

The Class B segment (typically assets built between 1980 and 1999) represents Denver's core "workforce housing." These properties offer good amenities and competitive locations, making them highly susceptible to pricing pressure from the massive wave of new Class A supply flooding the market.

Vacancy Rate Trends

Class B assets are feeling the most competitive squeeze because they are the most direct substitute for new Class A units offering concessions.

• Current Status (Late 2025): Class B vacancy rates are currently the most elevated of the stabilized asset classes (B and C). They tend to hover in the 6.5% to 7.8% range. This is primarily because renters who might have previously chosen a Class B property are being pulled up-market by heavy Class A concessions (like two months free rent).

• Historical Trend (2022-2024): After a period of extremely low vacancy in 2022 (often 4.0%–4.5%), Class B vacancy has climbed steadily. The increase accelerated in late 2024 and 2025 as the volume of new construction peaked and began actively competing for mid-market tenants.

Rental Rate Trends (Effective Rent)

Class B effective rents have been the most volatile, with net rents either declining or remaining flat due to concessions needed to compete with Class A, even if the gross advertised rent remains high.

• Current Status (Late 2025): Average effective rent for Class B apartments typically ranges from $1,700 to $1,950 for a one-bedroom unit, and $2,050 to $2,350 for a two-bedroom unit.

• Historical Trend (2022-2024): Class B saw excellent rent growth in 2022, but that growth stalled completely in 2024 and 2025. While the gross rent might not have dropped, the effective rent (after factoring in concessions) has declined, forcing owners to reduce realized income to maintain occupancy.

Investment Implications: The Value-Add Opportunity

While Class B is currently facing high vacancy and soft rents, it offers a prime opportunity for sophisticated investors with a long-term view:

1. Lower Acquisition Costs: Current headwinds are forcing sellers to adjust pricing, creating better entry points for buyers (Cap Rate expansion).

2. Conversion to "B+": The best value-add strategy for Class B is not just basic renovation, but strategic, high-impact upgrades (e.g., in-unit washer/dryers, modern smart-home features, and amenity improvements like fitness centers) to compete directly with Class A features while maintaining a lower price. This transforms the asset into a "B+ property," allowing it to command a premium over standard B and defend against Class A competition.

3. Future Supply Contraction: As the Class A construction pipeline shrinks in 2026 and 2027, the intense competition will subside. Well-positioned B+ assets will be the first to capture renewed demand and experience the strongest rent growth as the market stabilizes.

Sources

1. [Denver Metro Multifamily Quarterly Report - Q3 2025]

2. [Denver apartment market vacancy rates and rent growth trends]

3. [Multifamily Market Trends: Class A vs. Class B Performance]

This analysis shows that Class B properties are experiencing a temporary dip due to Class A concessions. The immediate challenge is high vacancy, but the long-term opportunity lies in acquiring assets at a discount now and performing strategic upgrades to position them for the market rebound in 2026.