Denver’s decade-long rent growth ends in second quarter
For the first time in more than a decade, the Denver apartment market saw declining year-over-year rent growth, according to the Apartment Association of Metro Denver’s quarterly Denver Metro Area Apartment Vacancy and Rent Survey.
The second-quarter survey, conducted by the University of Denver’s Daniels College of Business and Colorado Economic Management Associates, noted that compared to second-quarter 2019, average rent decreased to $1,506 per month, a $30 monthly decrease and a $360 annual decrease. This represents an inflation-adjusted 2.1% decrease in rents. The last time rents were lower than the period 12 months earlier was in the first quarter of 2010.
“This report is good news for future renters,” said Mark Williams, executive vice president of the Apartment Association of Metro Denver. “Not only are rents not climbing, they went down for all but one floor plan type. There were decreases in all categories, except for two-bedroom, one-bathroom units. This is likely because a renter who had an extra bedroom has added a friend to his or her lease.”
The survey noted that the decrease in rent occurred in 24 out of 36 submarkets, while nearly every age of apartment and nearly every apartment size saw declines in rental prices. Newer properties showed the steepest decreases in rents, as properties built in 2010 now have average rents of $1,840, a $105 drop from last quarter. Properties built in the 1970s remain the least expensive to rent, averaging 20% less than average rental costs for all apartments.
The second-quarter survey was modified to collect COVID-19-specific data, asking about delinquency patterns for the months of April, May and June. The results demonstrated that delinquency was very low with a majority of rental providers responding that over 95% of renters paid their rent, according to the report.
“This Q2 report continued to show relative stability in the apartment market, which was difficult to predict at the start of the COVID-19 pandemic. Over the past few months, housing providers have worked closely and diligently with residents who were impacted by COVID-19 economic hardships to create flexible payment plans and creative solutions that were a win win for everyone involved.”
A total of 1,170 new units were added to metro Denver’s apartment inventory for a net-positive absorption of 3,801 units in the second quarter.
The survey noted that the average overall vacancy was 5.1%, down from 5.9% last quarter but virtually flat compared to a year ago and in line with historical patterns that show higher vacancy in the first quarter compared to the second and third quarters.
“Vacancy continues to be low, and we are still well below the market’s long-run average of 6.8%,” said Teo Nicolais, a Harvard Extension School instructor specializing in real estate. “We historically see second quarter vacancy lower than the prior quarter. This has been the case for each of the last 11 years.”
Concessions ended the second quarter at $84 compared to $88 in the first quarter. New construction continued to slow in the second quarter as year-over-year construction of 8,978 units is the lowest number on record since the second quarter of 2016.
The Denver Metro Area Apartment Vacancy and Rent Report is coordinated and published by the Apartment Association of Metro Denver. The survey is conducted by the University of Denver’s Daniels College of Business and Colorado Economic and Management Associates and is sponsored by the Colorado Division of Housing and Newmark Knight Frank Multifamily.
The quarterly Vacancy and Rental Rate Survey is authored by Ron L. Throupe, Ph.D., of the University of Denver Daniels College of Business, and Jennifer L. Von Stroh of Colorado Economic and Management Associates.
Featured in the August 5-18, 2020, issue of CREJ