John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... The overall Denver-area apartment vacancy rate fell to 5.3 percent in the third quarter, a 28.4% drop from the 7.4 percent vacancy rate recorded in the third quarter of 2009, according to a report released today.
In the second quarter, the vacancy rate stood at 6.1 percent, according to the report by the Apartment Association of Metro Denver and the Colorado Division of Housing. In the third quarter, the apartment vacancy rate is the lowest it has been since the third quarter of 2007. Rates have now fallen for three consecutive quarters.
In the past, demand for apartments has tracked closely with job creation, but in recent quarters, demand has been strong in spite of job losses.
Vacancies at pre-recession levels
“The last time vacancies fell to 5.3 percent in the metro area, Colorado was at the height of the recovery that followed the 2002 recession,” said Ryan McMaken a spokesperson for the Colorado Division of Housing. “Total employment in Colorado is still down quite a bit from the 2008 peak of the market, so the fact that vacancies are back to those levels shows that demand for apartments is looking pretty resilient right now.”
Vacancy rates had initially increased following the rapid increase in the unemployment rate in late 2008 and early 2009, rising to 9.0 percent. But the vacancy rate quickly fell below eight percent by the end of 2009, and is now at a three-year low. The last time the metro-wide vacancy rate fell below 5.3 percent was during the first quarter of 2001.
Rents increased for the third quarter in a row as the metro-wide average rent increased from $880.99 to $912.68, or 3.6 percent, from the third-quarter of 2009 to the same period this year. All counties in the metro area reported year-over-year increases in average rents. At 3.6 percent, growth in rents outpaced the most recent Consumer Price Index increase for the Denver area which was 1.7 percent for the first half of 2010.
Low wages pose problem
Tenants continue to see few wage increases, however, and this presents challenges for owners seeking rent increases.
“With consistent declines in vacancy, we’re starting to see some higher gross rent levels,” said Gordon Von Stroh, a professor of business at the University of Denver and the report’s author. “On the other hand, rental losses due to concessions are at the highest levels we’ve seen since 2007. A lack of income growth for tenants is still putting downward pressure on effective rents.”
Rental losses due to concessions, discounts and delinquencies rose to 13.6 percent during the third quarter of this year, rising from 10.8 percent during the third quarter of last year. Rental losses are at the highest level experienced since the first quarter of 2007 when rental losses were 14.3 percent of gross rents.
By the numbers
For 2010’s third quarter, the highest vacancy rates were found in Arapahoe County where rates fell year-over-year from 8.5 percent to 6.7 percent. Rates were lowest in the Boulder/Broomfield area where vacancies fell year-over-year from 5.5 percent to 3.5 percent. With the exception of Douglas County, vacancy rates fell in all metro Denver counties from the third quarter of 2009 to the same period this year. The vacancy rate in Douglas County increased slightly year over year from 4.3 percent to 4.4 percent.
2010’s first quarter vacancy rates by county were Adams, 4.4; Arapahoe, 6.7; Boulder/Broomfield, 3.5; Denver, 5.3; Douglas, 4.4; Jefferson, 3.9.
Average rents for all counties were: Adams, $914.71; Arapahoe, $881.97; Boulder/Broomfield, $993.25; Denver, $905.01; Douglas, $1112.52; and Jefferson, $863.99.
Contact John Rebchook at JRCHOOK@gmail.com
