The vacancy rate generally moves upward in response to recessions as demand goes down. Note, however, that in spite of stagnant employment, vacancies continue to decline.
We see that the demand extends to most market areas as well. The second slide shows that few market areas reported vacancy rates above 5 percent during the second quarter. The black bars show the second quarter vacancy for each market area. The red bars are added to show the vacancy from the second quarter of 2010. Numerous markets reported vacancy rates above 7 and 8 percent in 2010, but few areas report significant vacancy this year.
The economic vacancy, which takes into account rental losses due to concessions and missed payments also is declining. Economic vacancy (the green bars) are also back to 2002-2002 levels, suggesting continued strength in the multifamily rental market.
Rents continue to climb as demand increases and supply remains somewhat constrained. The next slide shows the year-over-year rent growth for the Denver metro area. The average rent grow 7.1 percent from the second quarter of 2011 to the same period this year. This is the largest rent growth rate since the third quarter of 2001 when the rent grew 8.5 percent. Rent growth was weak during the inter-recession years of 2003-2008.
The next slide shows both median rent and average rent for the metro Denver area. Both behave in a similar fashion and have both begun to quickly move upward in recent quarters. The average rent in metro Denver hit $979 during the second quarter, and the median rent hit $916.
The strong demand is partially explained by demographics as households continue to form in the state, and new in-migration continues from out of state. Young entry-level workers continue to regard Colorado as a popular place to move following college graduation. These entry-level workers are a major component of the target market for apartments.
Nevertheless, the number of new units delivered to the Denver metro market has not been large by historical standards. The final slide shows a four-quarter moving average for new units delivered for metro Denver. Unit totals are still well below what they were in some previous periods.