Thursday, November 1, 2012

Slideshow: Colorado Springs rents and vacancies during Q3 2012

The Division of Housing today released its vacancy and rent survey for the Colorado Springs metro area. The market continued to show signs of mild tightening in vacancy with some ongoing rent growth. Apartment demand is being somewhat lessened by a weak job market in the region.  Nevertheless, the overall trend is toward higher rents although vacancy rates have largely flattened out at 6 percent. The following slide show looks at some recent trends in the apartment market in the region.

As reported today, the apartment vacancy rate in the Colorado Springs area during the third quarter was down to 6.1 percent during the third quarter, falling from 6.2 percent during the third quarter of last year and is up from 6.0 percent reported during the second quarter of this year. The graph shows that the metro-wide vacancy rate is now at a ten-year low, dropping off from the past decade of elevated vacancy rates. The region has not yet returned to the vacancy rates seen before the 2002 dot-com bust however.

The second graph shows the vacancy rates by submarket within the region. The overall trend is downward in vacancies, and we can see that one of the biggest factors in keeping the metro-wide vacancy rate as high as it was through 2007 and 2008 were the very high vacancy rates seen in the Southeast region and the Security/Widefield/Fountain area. We're now starting to see vacancies really fall off in those two submarkets, likely being driven by a flight to affordability in apartments. 

The third graph shows the overall average and median rents in the Colorado Springs area.  Rent growth was very strong and sustained through 2011, and as of the third quarter is at an all-time high.

The fourth graph shows the percentage change in the average rent for the Colorado Springs area. The third quarter's growth of 1.1 percent is at a very moderate rate, and reflects some slowing in rent growth over the past the quarters.  Nevertheless, there has been year over year growth for the past eleven quarters which is the most sustained growth we've seen since the days of the dot-com boom.

The fifth graph shows average rents broken out by market area. The high-rent areas are the Northwest and Far Northeast areas while the low-rent areas are Southeast, Central, and the Security/Widefield/Fountain areas. The Central region has seen some of the strongest growth in recent years while the Security/Widefield/Fountain area has been largely flat in its rents. Recent declines in vacancies in southern areas of the Colorado Springs are may drive more growth in the future. However, the collapse in the vacancy rate in the Security/Widefield/Fountain area since 2009 (see graph 2) has not yet turned into substantial rent growth in that area.

The final graph shows economic vacancy and rental losses for the Colorado Springs area. Although the vacancy rate in the region has largely flatlined, there is a clear downward trend in rental losses and economic vacancy. 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 over a decade.