Construction Activity Rise and Sales Drop
Central Denver Apartment Market Report: Cover page of our 2017 Q3 newsletter
The Denver skyline continues to be dominated by construction cranes. There is good reason to think that construction has been running rampant for the last four years – – it has! Over 40,000 apartment units have been built in metro Denver since the beginning of 2013. And currently, according to James Real Estate Services’ most recent report, there are an additional 25,000 currently under construction across the metro area. The most concentrated area of construction has been, and continues to be, within the Denver city limits.
The current vacancy rate for the metro area is 5.4%, according to the Apartment Association of Metro Denver statistics from their 3rd quarter report released in late-October. 5.4% vacancy is up from 5.0% reported in June. Vacancy rates historically rise from the summer to fall quarters, but the current 5.4% rate is also higher than a year ago (5.1%) and two years ago (5.0%). Quite simply, demand has not been keeping up with the pace of construction.
In Central Denver, the current vacancy was reported as 7.8%, a huge increase from two years ago (4.0%). But it is reassuring to dig into the details and see that it’s the new construction that is driving up Central Denver’s average vacancy rate. While apartments built since 2010 average 20.9% vacancy, buildings constructed in the 1960’s have a vacancy rate of just 5.1%.
We’ve heard a number of examples from clients, owner-operators and management companies that leasing activity has slowed down since September. There is a typical seasonal slowdown most years in the fall and winter, and we won’t be surprised if vacancy rates climb again when year-end statistics are reported in a few months.
by Greg Johnson