Rents likely will remain steady through 2018, when the construction of thousands of new apartments wraps up
In this June 29, 2016 photo, new apartment buildings line a street in downtown Denver.
Average metro Denver apartment rents declined last quarter for the first time since 2013, with a $3 per month drop in lease rates signalling that the market is leveling out, at least for a while, according to the Denver Metro Area Apartment Vacancy and Rent Report.
“It’s good news for renters, just knowing that the past few third quarters, rents have gone up $25 to $28 per month,” said Apartment Association of Metro Denver spokesman Christopher Dean. “This time it declined almost $3.36. Baby steps. I wouldn’t go so far as to say it’s going to decrease for current renters, but they aren’t going to see skyrocketing rents.”
Rents rarely drop during the third quarter — it’s happened only four times in the last 29 years, most recently in 2007, when the average decreased a little more than $5, Dean said. Rents dropped about $7 in fourth quarter of 2013.
In the third quarter, average rents decreased to $1,368 per month — kept artificially high by a surge of luxury apartment construction and a shortage of new for-sale condominiums that has kept would-be buyers renting. The median rent increased $5 to $1,329 per month, according to the survey conducted for the Apartment Association by University of Denver’s Daniels College of Business and Colorado Economic and Management Associates. The report was released Tuesday.
The slight decline in average rents is attributed to the delivery of thousands of new apartments to the market this year, a pace that is expected to continue through 2018, when the majority of projects in the pipeline wrap up.
“We’ve seen more apartment units built in the last three years than in the 11 years prior to that combined,” Mark Williams, executive vice president of the Apartment Association of Metro Denver, said in a news release. “The long-term impact of the new supply on rents is unmistakable. Last September, average rents had increased by 12.8 percent to $1,291 in the preceding 12 months, this September they increased by only 5.8 percent year-over-year.”
The vacancy rate decreased to 5.1 percent from 5.4 percent in the third quarter of 2015, leaving about 16,000 apartments vacant in metro Denver. For the quarter, 3,641 apartments were rented as 2,971 new units hit the market. For the year, 12,493 apartments were rented and 7,222 new units have been completed.
“This absorption continues to show the desirability of the Denver market, supported by an increase of in-migration, a decreasing unemployment rate, and increased business activity,” the study’s co-author Ron Throupe said in a news release.