We saw some softening in the multifamily market in Colorado Springs as a result of new construction in both multifamily and single-family houses (since single-family houses are a substitute for multifamily units). It is also likely a factor that total employment, according to the household survey, was down in Colorado Springs in December.
The first graph shows the metro-wide vacancy rate for Colorado Springs. As is often the case due to seasonality, the vacancy rate slightly spiked during the fourth quarter. Note that this has happened for the past four quarters:
If we divide out the various regions of the Colorado Springs area, it's clear that in general, vacancy rates are way down from where they were in 2009, with the largest drops coming in the Southeast and Security-Widefield/Fountain regions.
The vacancy rate headed up to 7.7 percent in the Far Northeast, and this is not surprising since much of the new multifamily construction is in that region. In fact, if we include the vacancy units in new lease-ups, the vacancy rate in the region hit 13 percent in the fourth quarter. But of course as those new units fill, the vacancy rate will come back down.
The areas with the highest vacancy are the Far Northeast and the Southeast. Interestingly, these are the two areas where rents have been pushed upward the most over the past 18 months. The average rent increased 3.4 percent in the Far Northeast over 18 months, and the Southeast increased 13 percent during the same period. We often find that vacancy rate head upward after a period of strong rent growth as turnover increases in response to rent increases. Most regions reported vacancy rates near 5 percent for the fourth quarter.
The next graph shows the average rent for the Colorado Springs area. We see that the average rent fell from the 3rd quarter to the 4th quarter, which is what we generally expect to see in the fourth quarter due to seasonal issues. Year over year, the average rent was still up, however, although barely. It was up 1 percent, which is one of the smallest rates of increase in more than two years. Nonetheless, the overall trend continues to be upward.
The final graph shows the average rent for each market area. Here we see those big rent increases over 18 months mentioned above. Note how the rent line and the orange line both show substantial growth in recent quarters. The overall trend us upward in the other markets as well. Note that the the average rent in the Security/Widefield/Fountain area (the purple line), however, is actually below where it was a decade ago. The rent in that area has gone nowhere in recent years, and if adjusted for inflation, it's even down over the past decade. The central region, meanwhile, has taken off since 2009.