Rental Market Meeting Demand for Denver Housing
Vacancy Up, Rents Down Amid Record Construction Levels
Average rents fell $8 between the second and third quarter of 2017 and average vacancy increased from 5.0% to 5.4% over the same period, according to the report.
“Housing cost may be soaring in Denver’s single-family home and condominium markets but the data shows that’s not the case for apartments,” said Mark Williams, Executive Vice President of the Apartment Association of Metro Denver (AAMD). Williams noted that median rents, which better captures the price a typical renter will encounter, fell from $1,377 to $1,370 during the last quarter.
The driving force behind the leveling out of rents is the continued, record-breaking pace of apartment construction. Denver built 4,315 new apartment units in the third quarter of 2017, more than double the 2,152 deliveries in the preceding 3 months.
“It’s equivalent to completing a new 48-unit apartment community every day for three months straight. That’s great news for a city struggling to keep up with demand for housing,” said Teo Nicolais, a real estate Instructor at Harvard Extension School.
“With 9,713 new apartments delivered in the first nine months of 2017, we’re 35% ahead of where we were this time in2016 - a year in which, incidentally, we set an all-time record high for new apartment construction. We’re almost certain to break the 10,000-unit mark for new apartment construction in 2017 which is something we haven’t seen in over three decades.”
Jeff Hawks, Vice Chairman of ARA, A Newmark Company (ARA Newmark) notes that the rate at which newly completed units are being snapped up points to the strength of Denver’s housing economy.
“The slowdown in single-family and condo starts combined with population and job growth continues to help absorb all of the apartment deliveries,” said Hawks, “This trend looks to continue for some time.”
The report found that the metro area’s absorption, which is the increase in the number of occupied units, was 10,443 for the past 12 months. In other words, Denver’s apartment market provides housing for 10,443 more households today than it did a year ago. The proven demand for housing means more construction is likely.
“All the new construction has made finding apartments easier for renters,” said Williams. “The report estimates that there are currently 18,134 vacant apartments in the metro area which is 61.7% more than Denver’s record low of 11,198 vacant units set in third quarter 2014.”
Williams noted that the new deliveries continue to skew metro-wide average rent figures since brand new apartments disproportionally command higher rents.
“The average rent for an apartment built since 2010 is $1,758 or 56% higher than the $1,126 average rent on apartments built in the 1970s,” said Williams, “The inclusion of the new, high end units with high class amenities means the average rent statistic will look artificially high.”
Among other findings in the report, vacancy rates continue to vary greatly across the metro area. Vacancy in Downtown Denver, the epicenter of all the major construction projects, for example, reached 12%. By contrast, Castle Rock is at 3.7%.
“There’s still a wide range of price points throughout the Denver-metro area. Average rents for the Downtown market where there’s lots of new construction hit $1,882. Average rents in Wheat Ridge were almost half that at $989,” said Nicolais, “It really depends on where you look.”
The Denver Metro Area Apartment Vacancy and Rent Report is coordinated and published by the Apartment Association of Metro Denver. The survey is conducted by the University of Denver’s Daniels College of Business and Colorado Economic and Management Associates, and sponsored by Multifamily Capital Advisors, ARA-Newmark, The Colorado Department of Housing, Yardi Matrix and Xfinity.