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Apartment rents rise

Highlights:

  • Denver Metro Apartment Vacancy Rent Survey released.
  • Report finds average rent over $1,100 a month.
  • Discounts also on the rise, blunting impact.

Rising Denver metro-area rents are being moderated by discounts and concessions to renters, according to a report released today.

Rent discounts and concessions averaged 9.3 percent in the second quarter up from 6.9 percent for the first quarter, according to the Denver Metro Apartment Vacancy Rent Survey released by the Apartment Association of Metro Denver and the University of Denver.

“Concessions are typically higher in the summer months and with the new product coming on-line that contributes to increased concessions because new properties are seeking to attract residents,“ said Mark Williams, executive vice president of the Apartment Association of Metro Denver.

This pushed up what’s known as the “economic vacancy” rate, which combines physical vacancy plus concessions and discounts, from 12 percent in the previous quarter to 14 percent.

“Average rental rates for the second quarter were $1,117, up from $1,074 the previous quarter,” Williams said.

The report noted that average rates were around $800 in 2002.

“But when adjusted for inflation, rents have been essentially flat over this period,” Williams said.

The overall metro-area vacancy rate was 4.7 percent, up from 4.2 percent in the second quarter in 2013.

In the second quarter in 2014. the region added 1,261 new apartment units, bringing the total metro-area inventory to 298,461 units, according to the survey 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.

“Probably the most surprising statistic is the number of rental units absorbed this quarter,” said Jerry Kendall, principal of Multifamily Capital Advisors, a sponsor of the survey.

“There were an additional 4,388 more units occupied lowering the vacancy rate to 4.7 percent that is 3,127 more occupied units net after absorbing the 1261 new units that were delivered,” Kendall continued.

“This really shows the strength in our Denver apartment market,” Kendall said.

“Our local economy is showing signs of job growth, combining a growing population and a strong demand for rental housing,” he said.

“Everyone is focusing on the deliveries of new apartment units,” said Jeff Hawks, principal of Apartment Realty Advisors, or ARA, which also is a sponsor of the survey.

“The state of Colorado believes that we will create seven jobs every hour in 2014,” Hawks continued.

“Five Colorado residents turn 20 years old every hour, but we are only delivering one new apartment unit per hour,” Hawks said.

“Sounds like a shortage to me,” Hawks said.

One reason for that is a shortage of workers, Williams said.

“Tens of thousands of new apartment units remain in the planning stages of construction, are still slowed by the tight construction labor market,” Williams said.

“When those are available they will place downward pressure on rents,” he added.

The report also is sponsored by the Colorado Housing and Finance Authority, the Colorado Division of Housing and Pierce-Eislen.

Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.