The apartment vacancy rate in the Denver metro area fell to 4.3 percent in the third quarter, dropping to the lowest vacancy rate recorded in any quarter in a dozen years, according to a report released today by the Apartment Association of Metro Denver and the Colorado Division of Realty.
The last time the vacancy rate was lower was in the third quarter of 2000, when it stood at 3.7 percent. At that time, the average monthly rental rate was $722, or about $970 in inflation-adjusted dollars, which is not much higher than today’s average rental rate of $986.
The apartment vacancy rate was down from 2011’s third-quarter rate of 4.9 percent, and was also down from this year’s second quarter rate of 4.8 percent.
For the past 12 quarters, the vacancy rate has fallen when compared to the same quarter one year earlier. The last time the quarterly vacancy rate rose year over year was during the third quarter of 2009.
From the third quarter of 2011 to the same period of 2012, the vacancy rate dropped in Adams, Arapahoe, and Jefferson counties, and in the Boulder/Broomfield area. The vacancy rate rose in Douglas County and was flat in Denver County during the same period.
“Considering that we were already under five-percent vacancy, this additional drop is significant,” said Ron Throupe, professor of Real Estate at the Burns School of Real Estate and Construction Management at the University of Denver, the report’s author. “Rent growth hit an 11-year high during the second quarter, but there is still enough demand out there to keep filling up units.”
As vacancy rates moved down, the area’s average rent increased. During the third quarter of 2012, the average monthly rent of $986 in metro Denver is up 5.2 percent, or $49, from last year’s third-quarter average rent of $936.
The average rent rose in all counties measured except Adams County, with the largest increases found in Arapahoe County in the Boulder/Broomfield area where the average rents grew year over year by 7.1 percent and 8.1 percent, respectively. The county areas with the highest average rents were Douglas County and the Boulder/Broomfield area where the average rents were $1,140 and $1,115, respectively. Adams County reported the lowest average rent at $893.
“The average rent has grown year over year in every quarter for the past two and a half years, and it has recently begun to accelerate,” said Ryan McMaken a spokesman for the Colorado Division of Housing. “The rent growth we’re now seeing is starting to look like what we experienced in the days of the dot-com boom.”
This year’s third-quarter vacancy rates by county were:
- Adams, 4.2 percent.
- Arapahoe, 4.8 percent.
- Boulder/Broomfield, 2.9 percent.
- Denver, 4.3 percent.
- Douglas, 4.1 percent.
- Jefferson, 3.7 percent.
Average rents for all counties were:
- Adams, $893.
- Arapahoe, $956.
- Boulder/Broomfield, $1115.
- Denver, $1015.
- Douglas, $1140
- Jefferson, $949.
The Vacancy and Rent Surveys are a service provided by the Apartment Association of Metro Denver and the Colorado Department of Local Affairs’ Division of Housing to renters and the multi-family housing industry on a quarterly basis. The Colorado Vacancy and Rent Survey reports averages and, as a result, there are often differences in rental and vacancy rates by size, location, age of building, and apartment type. The full report is available through the Apartment Association of Metro Denver and limited information is available online at the Colorado Division of Housing.
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I predicted a couple years ago that rents and prices for multi-family would at least double during this cycle. Its nice to see things coming to fruition.
I call bullshit.
You always use the word cycle.
How about 2 dates: start-end?
Dave- I’m so glad you brought it up!
Well DJ’s cycle starts the pre-soak, then wash, followed by extra rinse and then finally spin. In all, he is looking at about 50 min.
In all seriousness, I’m sure his cycle started the 1st sign of rent increases and ends the day rent prices double. Most likely his cycle will be in the neighborhood of 12-15 years.
If history repeats itself, going back as long as records have been kept, prices have always more than doubled the previous peak prices during the up cycle, which typically lasts around 7 years. The cycles have been growing longer, so I would not be surprised if this one lasts 10 years. If this one does last 12-15 years, prices would at least triple the previous peak. It started in 2010 and I think it will run through 2017, at which time most multi-family properties in Denver will trade for around $175-$200k/unit, up from about $80k/unit last year. This should be of no surprise to anyone who studies history and understands how the market works.
We shall see. Eventhough you moved the goal post from 2 years ago when you claimed prices would double in 3-5 years, you are still going to need 11% annualized return for the next 5 years in order for prices to double. You better hope for major wage inflation and a easy fed to keep rates low.
@DJ
Drop dead.
You refuse to set: start-end dates.
Chickenshit is the appropriate description.
Give me 2 dates, not years.
Then, we can hold your balls to the fire.
Sure, you provide the methodology and i will provide the forecast.
“rents and prices for multi-family would at least double during this cycle”
“Sure, you provide the methodology and I will provide the forecast.”
Sounds like a prediction to me.
Shut up and give us a date range.
LOL, every smart investor knows you cannot time the market within more than a couple years.
@DJ the 1st 10% appreciation in rent prices is the easy part. You will start to see how hard it becomes to raise rents with no income growth and new supply coming to the market in 2013.
@DJ-
At the current 5.2% year over year price increases, it will take 14 years for your prediction to come to “fruition” for rent prices to double. Since taxes and insurance are rising by 3-5%(YoY) your ROI is much less than 5.2%.
a chart is worth a 1001 words
Your negativity is interesting Jason. I have already sold buildings that i purchased in 2009 for 50% more than i paid. And my roi with 5% down plus cash flow was well over 300% on an annual basis. Job growth is the best since the ’90s and so is the vacancy rate. Rents will continue to grow for at least 5 more years. Its still early in the cycle, so you haven’t missed the boat yet.
I would consider myself slightly negative to slightly positive on rental prices. I just find your claim of rents doubling in the next 3-5 years, laughable.
I stand by my initial prediction that prices will double during this cycle. So we’ll see.
Kinda reminds me about when i predicted gold would surpass $1000 an ounce back in 2004. Everyone thought that was laughable too.
Yes, we shall see. If you are correct, Kal Zeff’s kids might have made one of the biggest mistakes in Denver muti family real estate history by selling their portfolio this year.
Yes, I thought that it was a bad time to sell. Anyway, why sell everything. I would be very surprised if they are able to match the returns they would have made in Denver over the next 5 years.