New apart­ments af­fect­ing “nat­u­ral forces of sup­ply and de­mand”

The Denver Post - - FRONT PAGE - By Aldo Svaldi The Den­ver Post

Metro Den­ver apart­ment rents lev­eled off and va­can­cies rose sharply be­tween the third and fourth quar­ters af­ter a surge in new sup­ply left more land­lords scram­bling to fill their units, ac­cord­ing to a quar­terly up­date from the Apart­ment As­so­ci­a­tion of Metro Den­ver.

“The nat­u­ral forces of sup­ply and de­mand are at work, and there has been an enor­mous amount of new apart­ments added to the sup­ply, so rents are flat­ten­ing,” Mark Wil­liams, the as­so­ci­a­tion’s ex­ec­u­tive vice pres­i­dent, said in the re­port.

The drop in me­dian rents wasn’t huge— a $ 7 de­cline from$ 1,252 amonth in the third quar­ter to $ 1,245 in the fourth. The av­er­age rent held steady at $ 1,292 a month.

But in a sign more down­ward pres­sure on rents could be com­ing in the months ahead, the area’s apart­ment va­cancy rate surged to 6.8 per­cent from5 per­cent in the third quar­ter.

The fourth quar­ter is typ­i­cally a weaker pe­riod for apart­ment rentals, but the jump went far be­yond any sea­sonal ad­just­ment. It­was the big­gest quar­terly surge in va­can­cies since heavy job losses caused peo­ple to move out of their apart­ments in 2008 and 2009.

“It­was much more than ex­pected sea­son­ally,” said re­port co- au­thor Ron Throupe, a real es­tate pro­fes­sor at the Univer­sity of Den­ver.

Va­cancy rates were high­est in northwest Den­ver, at 17.4 per­cent; Boul­der County, ex­clud­ing Long­mont and the city of Boul­der, 14 per­cent; down­town Den­ver, 11.2 per­cent; and north Dou­glas County, 9.6 per­cent.

De­vel­op­ers have fo­cused on those ar­eas for higher- rent apart­ments. Given that own­ers of new apart­ment build­ings may not be fa­mil­iar with the sur­vey or may be too busy leas­ing units to re­spond, the ac­tual va­cancy rate in those ar­eas might be un­der­stated, Throupe said.

Sup­port­ing the ar­gu­ment of over­sup­ply

on the high end of the mar­ket, the more- af­ford­able ar­eas de­vel­op­ers passed over show much tighter apart­ment va­cancy rates.

Wheat Ridge is at a low 2.6 per­cent, while En­gle­wood and Sheri­dan are at 3.3 per­cent, north­east Den­ver at 4.1 per­cent and south­west Den­ver at 4.2 per­cent.

Boul­der’s Univer­sity Hill area, which has con­stant stu­dent de­mand, was at a tight 2.7 per­cent.

The re­port said de­vel­op­ers added 1,678 new units to the lo­cal mar­ket, but that net ab­sorp­tion was a neg­a­tive 4,247 units, mean­ing once- oc­cu­pied units were sit­ting va­cant.

Throupe, how­ever, dis­missed con­cerns that the apart­ment mar­ket was headed for a “crash” or that the ris­ing va­cancy rate sig­naled a deeper eco­nomic weak- ness.

“Rents won’t crash,” he said. “We will go flat for a while. We aren’t hav­ing a ma­jor down­turn.”

Given strong in- mi­gra­tion, the only thing that­would change that would be a lack of job growth. But an em­ploy­ment re­port Tues­day showed the state added a strong 10,700 jobs in De­cem­ber fromNovem­ber.

A sep­a­rate re­port from Ax­io­met­rics showed that the an­nual rate of apart­ment rent in­creases in De­cem­ber had fallen to 5.5 per­cent, down from 6.4 per­cent in Novem­ber and be­lowthe peak an­nual in­crease of 12.8 per­cent reached in Fe­bru­ary.

Ax­io­met­rics puts the av­er­age ef­fec­tive rent in the Den­ver- Auro­raLake­wood area at $ 1,323 per month, down $ 41 from the peak rent reached in Au­gust.

Crews per­form work in Septem­ber to turn the old VQ Ho­tel – next to Sports Au­thor­ity Field – into Turntable Stu­dios, a 179- unit macro- mi­cro apart­ment com­plex. Ac­cord­ing to the Apart­ment As­so­ci­a­tion ofMetro Den­ver, the av­er­age rent for apart­ments in the Den­ver area held steady at $ 1,292 amonth in the third quar­ter of 2015. Kathryn Scott Osler, Den­ver Post file

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