Denver - Apartment Rents and Vacancies Rise in 1Q 2015

7 Replies

For Denver investors, the latest data from the Denver Metro Area Apartment Vacancy and Rent Survey is out.  This is viewed as the authoritative survey for the local market & is performed by the University of Denver and sponsored by the Apartment Association of Denver.

Rent growth was strong (+13.4%), but vacancies ticked up as more high-end units came into the market.

Apartment Rents and Vacancies Rise in the First Quarter in Metro Denver

@Matthew Schroeder thanks for the post. This is on the heals of the other post with TV "news" story about rents. This article actually had some good information in it and was not the typical fluff with a few anecdotal quotes saying how tough things are for renters. 

The way I see it the cheaper the rents the lower the vacancy rate. North Aurora had 0% vacancy. It is probably a small sample size but that is amazing.  

I saw a post the other day on Craig's List with a down town place offering 2 months free rent. That shows that there is definitely a growing supply and effective rents will be dropping. 

New builds since 2005 have a whopping 12.9% vacancy rate. These are all the new expensive units. I'm sure glad I don't have 300 units just breaking ground targeting that segment. If you don't have a crack management team in place then I would expect there to be some blood in the water in the next couple of years. 

We better see some income growth or things will sputter out. 

Also was surprised as I read this.  Some real (estate) nuggets in there.  Very interesting how high vacancies are in 'luxury' or simply newer product.

"Newer buildings, those built since 2005, had a 12.9 percent vacancy rate, while some of the oldest and most affordable buildings, those built between 1940 and 1949, had only a 0.7 percent vacancy rate."

I assume vacancy rates were also pretty low for ALL "older" product, but I suppose it could be an anomalous and misleading statistic.  

@Bill S.

 Do you have any ideas on how people could position themselves to take advantage of the overbuilding of apartments focused on young professionals that seem to be taking place downtown?

I was thinking that if rents drop on those buildings that renting a unit and turning it into a vacation rental may be an option but do you have any ideas on a bigger scale? What will happen if these apartments can't sustain themselves?

@Scott Trench

It would be interesting to try your dorm style affordable housing idea if some of these new apartments fail and are forced to find a way out. The demand for affordable places to live is obviously high and there does not seem to be any help on the horizon, especially near downtown.

@Walker Hinshaw

Agreed - I'm fascinated by that concept and perhaps a little naive.  But with rent growth this strong, and people running out of affordable housing options, it seems to me like a creative solution could be worth a shot.

I've always wondered if something radical - like the dormitory style housing of college campuses - wouldn't be a great option to give to the residents of Denver.  Housing hundreds of people as economically as possible and sharing amenities like a communal living room and kitchen wouldn't be ideal for many, but if that moves rents as low as $300-$400 you might have a great new market.  

Does anyone else think this is viable, or am I out of my mind?

I definitely think it is 5 to 10 years out and the existing apartment buildings will have to struggle, but if you could pack a bunch of people into the same sq. ft. and charge them an amount they could actually afford, I think it could be a surprisingly good business model. Upkeep and general management would take a lot more work though.

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