Interest Rates on the Rise & Jobs Fuel Vacancy Decline
Central Denver Apartment Market Report: Cover page of our 2018 Q1 newsletter
As market influencers, our clients often ask us, “where is the market heading?” That question stems from a concern that the next recession will occur soon. The Denver apartment market’s expansion phase has lasted for 7 years resulting in amazing appreciation for multifamily owners.
Cary Bruteig, MAI, of Apartment Appraisers & Consultants has studied Denver apartment builings for 25+ years. His firm has surveyed over 400,000 apartment units in 2,000 completed appraisals and/or market studies. Bruteig is widely regarded as a leading source for multifamily statistics in Denver.
I interviewed Cary on Calibrate’s podcast and learned that a recent surge in job growth has decreased vacancy. Vacancy has been increasing for the last 3 years due to a large construction pipeline. Historically Denver’s absorption rate was 4,000-5,000 units/year; lately the absorption has been 8,000-9,000 units/year. While absorption of newly constructed units was strong, Denver developers were still building more than our market could lease – around 10,000 units/year.
Job growth expanded, instead of shrinking during the summer of 2017 which led to an unexpected reduction in apartment vacancy. The trailing four-quarter vacancy rate has actually decreased for all three quarters of 2018. The word on the street is that change is inevitable, and we agree, but this market might have a little fuel left in the tank.
by Kyle Malnati