Metro Denver apartment market erases two years of rent increases

Developers continue to deliver so a great number of new apartments that vacancy rates have reached a -year high and the average rent has fallen below levels seen two years ago according to a first-quarter update Thursday from the Apartment Association of Metro Denver AAMD The average apartment rent in metro Denver fell to in the first quarter down from in the fourth quarter and in the first quarter of Had average rents kept up with overall inflation they should be closer to a month This occurred because we had such a strong and large construction pipeline mentioned Cary Bruteig a researcher with Apartment Insights and the assessment s author Builders have added new apartments in the past months while renters have leased or absorbed That overhang has helped push up the vacancy rate or share of unfilled apartments to from in the fourth quarter the highest levels seen since the Great Recession Douglas County has the lowest vacancy rate at while Denver has the highest at In the the bulk distressed submarkets southeast Denver and western Aurora the vacancy rates are above with certain older buildings sitting empty and revisiting rents seen in revealed Darren Everett managing principal at Two Arrows Group who spoke on a press call hosted by the AAMD The lowest average rents are unveiled in buildings built in the s while a few of the highest value for the dollar spent can be detected in newer apartments in central Denver which has seen a disproportionate concentration of new multi-family construction While the average apartment that was built in the s has a rent of there are various places that you can lease for under per month Everett reported Landlords can handle a vacancy rate and will squirm when it gets above They take action when it gets to by cutting rents and offering more concessions Bruteig commented Landlords would rather have more apartments occupied at a lower rent rather than have them sit empty in pursuit of a higher rent Given how a multitude of new units were being built Bruteig mentioned he thought the sphere s emerging point would have come a year or two ago Historically the sphere has absorbed an average of to new apartments a year going back to the early s In the past decade the average rose closer to a year It has run closer to in the past year an unprecedented response But in their apartment eating contest against developers renters are conclusively pushing away from the table and saying too much The challenge is that about more apartments are getting cooked up in the kitchen a process that can take three or four years If the business sector holds up then renters should find favorable conditions for another year or two until supply and demand get back in balance What concerns Bruteig is that the high vacancy rate and rent decreases now being seen are more commonly associated with the start of a recession If job losses increase then absorption rates would likely fall as renters fail to keep up due to reduced incomes more households double up and fewer people relocate to the region for work Absorbing the apartments now under construction in metro Denver would take three years at the new average or closer to five or six years using the historical average