Denver area rent catching up as vacancies tighten
– The Apartment Association of Metro Denver’s quarterly report on vacancy and rental rates show a 7% increase in average rent and vacancy levels dip under 4% for the second quarter of 2021. The average monthly rent in the Denver metro area is $1,651, compared to $1,544 one quarter ago. Vacancies fell from 5.5% to 3.7%, which is the lowest level in twenty years.
“Historically, rent increases in the second quarter, but this quarter’s figures illustrate just how strong the demand still is for apartments” explained Mark Williams, executive vice president for the Apartment Association of Metro Denver. “Rent levels stayed fairly flat during the pandemic, but we’re seeing significant rent increases across the nation as we come out of COVID. Aside from healthy consumer demand, rent levels are following the overall increasing cost of housing, inflation and the cost of labor and materials everyone is experiencing across the country.”
While gas prices have increased over 33% since this time last year - food, cable TV, internet, and travel costs are on the rise too. According to the Denver Metro Association of Realtors latest Market Trends Report, the average price of purchasing a home in the metro area increased to over $640,000 this month, and year-over-year the average closing price on a detached residential home has gone up over 30%. High home prices and low inventory mean that there are just not that many available homes at reasonable prices – and so renting is still an excellent option for many Colorado residents.
“It’s important to know that while monthly rents have increased, the market remains a good value for renters and is bouncing back quickly post-COVID,” continued Williams. “When we compare the rental market to the cost to buy a home which has increased by over 30%, respectively, renting an apartment remains a good economical choice for many Coloradans.”
University of Denver professor and researcher for the survey, Ron Throupe, explains in the report: “The year over year rent results underlie that the Denver market rent growth, which has been slowing since 2016, is now on the rise. It is yet to be seen if wage inflation will compensate for the increase in rents shown for this quarter.”
Throupe further explains “an influx of renters absorbed a whopping 10,298 units for the quarter…. this compares with the overall net absorption of 8,195 units for the entire year in 2020.” With the absorption and year over year increases were seeing “…we are now entering a new period of dynamics to play out.”
Metro wide there is an overall shortage of housing. Whether it be single family detached houses, condominiums, or apartments, Denver needs more housing. “Once the apartment vacancy rate dips below 4%, there is a clear signal we don’t have enough apartments. The availability has not been this tight since Q3 of 2000,” Williams points out “…the 4% threshold is a key metric for consideration of new development. But will cities and counties allow for more growth and create opportunities for new housing to keep pace with demand?”
There are over 371,000 apartments in the metro Denver area, and according to Apartment Insights, there are 140 new apartment communities in some stage of construction. Most of these developments are targeted for completion within the next two years, but labor shortages and supply chain issues are slowing the progress of these new units. Newer apartment construction is spread across the metro area and offers a long list of great locations and amenities for future renters. The Denver Metro area remains a great place to invest as residents continue to view Colorado as a desirable place to live and work.
About the Metro Denver Vacancy and Rent Report
The quarterly Vacancy and Rental Rate Report is authored by Ron L. Throupe, Ph.D. of the University of Denver Daniels College of Business, and Jennifer L. Von Stroh of Colorado Economic and Management Associates. The report has served as the most reliable source for comprehensive apartment data and analysis for 40 years and is made possible through the ongoing participation of the apartment industry and coordination through the Apartment Association of Metro Denver.