Monday, July 23, 2012

Rents in metro Denver surge 7.1 percent, largest growth rate in eleven years

The average rent for apartments in metro Denver rose 7.1 percent from the second quarter of last year to the same period this year. According to a report released today by the Apartment Association of Metro Denver and the Colorado Division of Housing, the second quarter’s year-over-year growth rate of 7.1 percent was the largest annual rate of growth reported during any quarter since the third quarter of 2011 when the average rent grew 8.5 percent. During the second quarter of this year, the average rent in metro Denver rose 65 dollars to $979 from last year’s second-quarter average rent of $915.

The average rent increased in all county areas, with Denver county and the Boulder/Broomfield area showing year-over-year increases of 75 dollars and 87 dollars respectively.

“Rents have been showing growth for the past two years, but during the second quarter, they really began to take off,” said 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. “If you drill down into the numbers you find some even more dramatic growth such as the 99-dollar increase in efficiency rents.”

The average rent in efficiency apartments in metro Denver increased from $674 during the second quarter of last year to $773 during the same period this year. The highest rents at the county level were found in Douglas County where the average rent rose to $1,131 during the second quarter. The lowest rent at the county level was found in Adams County where the average rent rose to $906 during the second quarter.

Average rents for all counties were: Adams, $906; Arapahoe, $956; Boulder/Broomfield, $1,091; Denver, $1005; Douglas, $1,131; and Jefferson, $919.

Rents rose as property owners responded to falling vacancy rates across the metro area.

The apartment vacancy rate in the Denver metro area fell to 4.8 percent in the second quarter of 2012, which is unchanged from 2011’s second-quarter rate, and is tied for the lowest vacancy rate seen in any quarter since the first quarter of 2001. The vacancy rate also fell from 2012’s first quarter rate of 4.9 percent.

The vacancy rate has consistently dropped in year-over-year comparisons over the past two years. The metro Denver vacancy rate has not risen year over year since the third quarter of 2009.

“You have to go back to the days of the dot-com boom to see lower vacancy rates than what we’re seeing right now, said Ryan McMaken, spokesman for the Colorado Division of Housing. “The demographics point toward growing demand, and even through developers are looking to build new units, not that many units have been delivered yet.”

Of the 37 submarkets measured by the survey during the second quarter, 26 of them reported vacancy rates below 5 percent. Traditionally, a vacancy rate below five percent indicates a tight market. The submarkets reporting higher vacancy rates tended to be on the eastern side of the metro area including various parts of Aurora and southeast Denver.

2012’s second-quarter vacancy rates by county were Adams, 4.9 percent; Arapahoe, 5.5 percent; Boulder/Broomfield, 3.6 percent; Denver, 4.8 percent; Douglas, 3.9 percent; Jefferson, 4.0 percent.