Average Rent Prices Decline in Metro Denver During Q4 2021
Vacancies Remain Low as the Apartment Market Stabilizes
This week, the Apartment Association of Metro Denver (AAMD) released 2021 fourth quarter results from the Denver Metro Area Apartment Vacancy and Rent Survey, conducted by the University of Denver’s Daniels College of Business and Colorado Economic Management Associates.
The metro Denver apartment market experienced a 2.86% quarterly decrease in rent, with an average rent price in metro Denver of $1,708.67. This represents a decrease of nearly $18, with average rent in Q3 2021 reaching $1,726.36. Average rent per square foot fell 0.99%, from $2.03 to $2.01. Rental discounts and concessions averaged 8.8 percent, as compared to 13.4% for the previous quarter.
“This quarter’s declining rent rates indicate that metro Denver’s apartment market is returning to its pre-pandemic stability,” said Drew Hamrick, senior vice president of government affairs for the Colorado Apartment Association. “For months, housing providers were prohibited from increasing rent on leased apartments. Rental units’ value was artificially deflated, and over the last several months, rent rates have accelerated back to meet market demand. As government interference in our industry wanes, the market corrects and rent rates stabilize, as we observed during Q4.”
The metro Denver apartment vacancy rate increased from 3.8% to 4.3%, with 22 of 23 metro Denver neighborhoods experiencing an increase in vacancy. Despite the increase, vacancy rates in metro Denver remain historically low, down 25.86% year-over-year. Metro Denver’s continued low vacancy rates should inspire confidence in the city’s rental housing market, indicating strong demand, a steady cash flow for rental housing providers and strong rental housing security for Denver residents.
“Continued low vacancy rates in metro Denver indicate the city’s ongoing need for new apartment units,” reported Mark Williams, executive vice president of AAMD. “Demand remains historically high, and unless we increase the pace of new construction, we’ll see high costs and low supply in 2022.”
As of Q4 2021, there is a total of 382,321 rental units in metro Denver. Across the fourth quarter, 6,282 new units were added, bringing the yearlong new unit total to 12,036. Overall, 2021 delivered the most new rental units since 2018. This is a strong positive indicator for metro Denver’s apartment market, which suffered a severe shortage of rental housing units during 2021.
Net absorption for the quarter was 4,987 units in metro Denver. For all of 2021, 19.353 units were absorbed, compared to just 8,195 units in 2020. Absorption is the net change in the number of apartment units rented between two time-periods: in this case, 2021 versus 2020. Increased absorption indicates strong resident demand for rental housing in metro Denver. It also indicates an ongoing need for new units.
“The key to housing affordability is housing supply,” Hamrick explained. “As we emerge from the pandemic, demand for rental housing is going to increase rapidly – especially in metro Denver. To keep rent affordable, our lawmakers have to create incentives for developers and support the construction of new housing in 2022.”
While rent prices remain high, year-over-year growth sits at a fraction of the price increases experienced by the local housing market. Over the last six years, the average price of a single-family home in metro Denver increased by more than 100%. Heading into 2022, rental housing remains the densest, most sustainable and most affordable housing option in Colorado.
Several unnatural forces impacted the rental housing market during Q4 2021. Some of these extenuating factors include record inflation growth, rising consumer prices and creating new cost burdens across the national economy. The United States’ ongoing labor shortage and supply chain interruptions also increased the costs of construction, maintenance and custodial services – an additional cost burden on Colorado’s rental housing providers.
The Denver Area Apartment Vacancy and Rent Survey reports median and average rates, and, as a result, there are often differences in rental and vacancy rates by apartment type, size, location and age of building/complex. These variances are more pronounced as the vacancy rate has fluctuated over the last several years. All information is based on data received for the month of September, apart from resident turnover and rental loss data, which is for August 2021.
This survey is conducted via mail and online submissions, and it only includes units with a certificate of occupancy. The fourth quarter 2021 survey includes information on 129,411 apartment units. This survey is possible because of the valued participation and contributions of professionals in the apartment industry and the consistent support of the survey’s sponsors. Comments on the survey are welcome at VonStrohHousingSurvey@gmail.com
About the Apartment Association of Metro Denver
The Apartment Association of Metro Denver is among the largest multi-family housing trade associations in the country, representing and supporting over 336,000 apartment homes in Denver. For more information about AAMD, please visit www.aamdhq.org.