Denver-area apartment vacancies hit 12-year low for Q4

Rental properties are a great invesment right now....

Denver Business Journal
February 2, 2012

The apartment vacancy rate in metro Denver was 5.4 percent in the fourth quarter of 2011, the lowest year-end rate in 12 years, according to a report Thursday by the Apartment Association of Metro Denver and the Colorado Division of Housing.

The Q4 rate -- the lowest for the quarter since 2000 -- was up from the third quarter’s 4.9 percent vacancy percentage, but vacancy rates tend to rise in the fourth quarter from earlier in the year, said Ryan McMaken, division spokesman and economist.

“Vacancies continue to decline year over year as demand grows faster than the production of new rental product,” Ron Throupe, professor of Real Estate at the Burns School of Real Estate and Construction Management at the University of Denver , and the report’s author, said in a statement.

“However, since the third quarter of 2011 we’re seeing some additional frictional vacancy as tenants move around in response to rising rents,” he said.

It was the ninth consecutive quarter the rate had dropped year over year.

Rents, meanwhile, continued to rise year over year. The median rent climbed to $870, up 2.8 percent from the $846 in the fourth quarter 2010. It rose in all the counties tracked. Denver County, at 3.4 percent year-over-year growth, and the Broomfield/Boulder area, at 3.7 percent, showed the biggest gains.

“You can see the general growth trend, but really there are only two areas out-pacing the general price increases in rent growth,” said ARA’s Terrance Hunt, principal. “Until those stay up above 3 percent, landlords are not keeping up with the general price increase (cpi).”

Douglas County continued to lead the pack with median rent at $1,046, followed closely by Broomfield/Boulder at $993

“The overall median rent in the Denver area has now increased year over year for eight quarters in a row, and the median rent has increased by almost 60 dollars over that time,” McMaken said in a statement. “The rent growth we’re now seeing is more robust than what we saw during the last expansion between 2002 and 2008.”

Hunt added that even though Atlanta-based ARA is tracking some 3,000 units delivered in 2012 and 2013 with multi-family projects over 50 units under construction, the market can absorb 4,500 annually for the foreseeable future. There’s another 3,700 units being tracked on projects with 100 units or more that are still in the planning stages.

“From the reports we’re getting from public schools, there’s about 35,000 people of graduation age a year,” said Hunt, which could indicate household formation numbers. “Back in 2006, I would say about 20 percent of household formation was going to rentals. Not it’s almost 50 percent.”

Vacancy rate and median rent by county:
Adams, 5.3 percent and $873.
Arapahoe, 6.8 percent and $840.
Boulder/Broomfield, 4.4 percent and $993.
Denver, 4.8 percent and $834.
Douglas, 4.7 percent and $1,046.
Jefferson, 4.4 percent and $836.