Rent and Vacancy Results Remain Strong
Central Denver Apartment Market Report: Cover page of our 2018 Q2 newsletter
Encouraging news was published in late July within the Apartment Association of Metro Denver’s 2nd Quarter Vacancy & Rent Report. Typical of the spring season, rents increased and vacancy rates fell since the winter months. Metro-wide, apartment vacancy dipped to 6.0%, a slight decrease from 6.1% in the 1st quarter report. The median rent for all apartments metro-wide increased from $1,379 last quarter, to $1,435 currently.
Because vacancy and rent statistics are skewed by larger, newly-constructed properties, it is more relevant for our clients to focus on the specific Central Denver figures reported. Drilling down further to the figures reported for buildings with less than 50 units (essentially removing the new construction) provides a clearer picture of how existing buildings are performing.
Vacancy for Central Denver apartment buildings between 9-50 units was only 3.4%, demonstrating strength in the face of competition from newer buildings. Rents for these smaller buildings continue to reach record levels, with studio apartments now averaging $995/month in Central Denver. Average rent for one-bedroom apartments was reported as $1,139, and $1,502 for two-bedroom units. For those of us who remember where rents were just a few years ago, it is remarkable that an average Capitol Hill studio apartment is nearly $1,000/month!
How we view things is often a matter of perspective. I once heard someone being asked if a glass was half empty or half full. His response, “It depends. Am I drinking or pouring?”
Similarly, there are two different perspectives on Denver’s apartment market, and the gap between those perspectives is widening. Buyers see it one way, and Sellers see it another.
Sellers tend to focus on recent history and what’s currently happening. Buyers, on the other hand, are looking ahead to what the future will bring. The increasing gap in their perception is that Sellers feel an optimism fueled by recent success, whereas there is a creeping pessimism among Buyers over concerns that these “good times” won’t last forever.
The primary goal for most Sellers, of course, is to maximize the price at which they sell. They choose to focus on today’s high rents and the high sales prices they’ve recently seen other buildings achieve. Buyers acknowledge those positive factors too, but also consider the negative impact of rampant construction and the reality of today’s higher interest rates.
For now, the optimism of Sellers is prevailing. Denver is still very much a “Sellers’ market”. We will not see a shift so long as we continue to have limited supply of buildings available for sale, and interest rates do not climb over 5%. In Denver, our glass remains near full!
by Greg Johnson