Monday, October 29, 2012

Slideshow: Third quarter 2012 vacancies and rents

Today the Apartment Association of Metro Denver released the Metro Denver Apartment Vacancy and Rent Survey for the third quarter of 2012. The report showed that the vacancy rate in the metro Denver area continues to decline as rent growth remains solid.

The first graph shows that the vacancy rate (4.3 percent) in the metro Denver area is now at a 12-year low and is at the lowest level since the third quarter of 2000 when the vacancy rate fell to 3.7 percent. The vacancy rate in metro Denver has rarely fallen below 3.7 percent, and that happened only twice in the past 30 years. The vacancy rate hit 3.7 percent during the third quarter of 1994 and the third quarter of 1982. The vacancy rate during the third quarter of 2012 was down significantly from the vacancy rate reported during most quarters of the past decade. The rate was 4.9 percent during the third quarter of last year. 

As the metro-wide vacancy rate declined, the vacancy rates in all metro counties continued to decline as well. The second graph shows that all county areas have shown a downward trend in vacancy rate in recent quarters. Arapahoe County has shown some of the highest vacancy rates in recent years, but even in Arapahoe County, the vacancy rate fell to 4.8 percent during the third quarter. With a vacancy rate of 2.9 percent in the Boulder/Broomfield area, vacancy rates across the board have been heading down. 

The average and median rents moderated somewhat during the third quarter, but both the median and average rent have grown considerable in recent quarters. The pace of increase in the average rent over time has increased since 2009. From 2010 through the third quarter of 2012, the average rent has grown by 3.4 percent. From 2002 to 2009, however, the average rent grew by 1.5 percent. Neither period rivals the late 90s, however when the average rent grew by more than 5 percent from 1996 to 2001. 

The year-over-year growth in the average rent is now approaching levels not experienced since the 1990s and the dot-com boom. As can be seen in the fourth graph, year-over-year growth during the late 1990s was very robust, and was weak from 2002 through 2009. Since then, however, rents have begun to post solid gains, although is not yet clear if rent growth will actually return to the levels experienced  during the late 90s.

The last graph shows that Economic vacancy in Colorado is down by more than 30 percent from peak levels experienced during 2004. As of the third quarter of 2012, economic vacancy was at the lowest level since the third quarte rof 2001 when it fell to 13.2 percent. Economic vacancy is the physical vacancy plus concessions and write-offs. The decline in the economic vacancy suggests that in addition to a decline in physical vacancy, the use of concessions is falling as well to lower levels than has been seen in a decade.