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Apartment vacancies in the Denver metro area fell again in the first quarter, dropping to 6.5 percent. According to a report released Friday by the Apartment Association of Metro Denver and the Department of Local Affairs’ Division of Housing, apartment vacancy rates fell to the lowest rate reported since the third quarter of 2008, falling from 2009’s fourth-quarter rate of 7.7 percent. The vacancy rate during the first quarter of last year was 8.4 percent.
In recent years, vacancy rates have tracked closely with the unemployment, illustrating a close connection between job growth and demand for apartments. In recent quarters, however, vacancy rates have remained low in spite of rising unemployment.
“In spite of the economy, there’s still relatively strong demand for rental housing right now,” said Lauren Brockman, a principal with Orion Real Estate Services. “Unemployment here is comparatively low compared with much of the nation, so people are staying here. And we’re also seeing people come in from out of state, so even with limited job growth, people want to be here, and many of them need apartments.”
Vacancy rates during the most recent recession contrast sharply with the 2002-2003 recession in Colorado. Vacancy rates peaked at 13.1 percent during the first and second quarters of 2003, but during the most recent recession, vacancy rates rose to only 9.0 percent during the second quarter of 2009.
Multifamily experts note that vacancy rates have been kept down by low numbers of new apartments added in the Denver metro region.
“We added almost 8,000 new units in 2001 and more than 9,000 in 2002, so that lead to quite a few vacancies as unemployment rose in 2003,” said Terrance Hunt, a broker with Apartment Realty Advisors. “But we’re facing a much different situation now. Between 2003 and 2009 fewer than 3,000 new units were added each year, so we may be looking at some pretty tight markets in the near future.”
For 2010’s first quarter, the highest vacancy rates were found in Arapahoe County where rates fell year-over-year from 9.7 percent to 7.2 percent. Rates were lowest in Douglas County where vacancies fell year-over-year from 7.1 percent to 4.4 percent. Vacancy rates fell in all metro Denver counties form the first quarter of 2009 to the same period this year.
2010’s first quarter vacancy rates by county were Adams, 6.8; Arapahoe, 7.2; Boulder/Broomfield, 5.0; Denver, 6.9; Douglas, 4.4; Jefferson, 5.8.
In general, a vacancy rate of 5 percent is considered the “equilibrium” rate. Rates below 5 percent indicate tight markets.
Average rents across the Denver metro area were largely stable. The overall average rent in the metro Denver area fell to $877.16, down from $881.92 during the first quarter of last year. Rents rose slightly from 2009’s fourth-quarter average rent of $875.39.
“Without job growth, and with renters looking to cut costs, it’s been difficult for owners to raise rents very much” said Ryan McMaken, a spokesperson with the Colorado Division of Housing. “However, once we see some job growth, demand should spur some significant rent increases.”
“Rental losses for owners from discounts and concessions are up compared to last year,” Brockman said. Concessions include offering tenants free rent for a month in return for signing a lease.
When compared to the first quarter of 2009, Adams County, Douglas County and Jefferson County reported increases in overall average rents, while average rents in Arapahoe and Denver counties fell.
Average rents in the Boulder/Broomfield were essentially unchanged as average rents increased by four dollar to $946.60.
The highest average rent was reported in Douglas County at $1055.12, and the lowest was reported in Arapahoe County at $833.94. Average rents for all counties were: Adams, $874.56; Arapahoe, $841.03; Boulder/Broomfield, $946.60; Denver, $883.87; Douglas, $1055.12; and Jefferson, $833.94.
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 at www.aamdhq.org; and limited information is available online at the Division of Housing web site: http://dola.colorado.gov/cdh/