Thursday, April 28, 2011

First Analysis: Metro Denver Vacancies and Rents

According to new metro Denver vacancy and rent data released today by the Colorado Division of Housing, multifamily rental vacancies fell while median and average rents increased.

The region-wide vacancy rate in metro Denver has fallen every quarter for the past six quarters when compared to the same quarter a year prior. As can be seen in the first graph, the year-over-year change in vacancies has not been positive since the third quarter of 2009, when the vacancy rate rose 13.8 percent over the year prior.

Graph 2 shows the vacancy rate for the metro Denver area for each quarter during the last ten years. 2011's first-quarter vacancy rate, which is unchanged from 2010's fourth quarter, is the lowest first-quarter vacancy rate reported since the first quarter of 2001. Vacancy rates in metro Denver declined following the 2002 recession, but peaked in Metro Denver in 2009 during the most recent recession. In spite of lackluster job growth, the vacancy rate then quickly fell again, and has remained near 5.5 percent for the last three quarters.

Not unexpectedly, growth in median rents has begun to build in the region as well. Notably, the median rent for the metro Denver area (compared year-over-year) has not decreased since the fourth quarter of 2009. In each quarter since, growth in median rents has either matched or outpaced inflation, suggesting true growth in inflation-adjusted rents.

The region-wide median rent in metro Denver has increased for the past five quarters when compared to the same quarter the previous year. As can be seen in the fourth graph, the past three quarters have shown growth that is among the strongest grwoth trends since 2002, but does not threaten to match growth from the 2000-2001 period at this time. (Related: This rent growth has been more subdued than rent growth in Colorado Springs.)

While the recent growth in rents and the declines in vacancy rates does not in itself prove continued demand for multifamily rentals in the region, the relatively small amount of new construction of rentals in the area will contribute to ongoing rent growth and tightness in vacancies.

In addition, the relative unattractiveness or lack of accessibility to for-purchase housing at this time will reinforce this trend.

Note: The average rent information above is not adjusted for inflation. For information on inflation-adjusted rents, see here.

The vacancy and rent report also contains information on average rents. For more information on the differences between median and average rents, see here.