OVERVIEW

The Denver metropolitan area apartment vacancy rate decreased to 3.9 percent for the third quarter of 1998. Since the third quarter of 1997, the rate was a constant 4.6 percent. For the third quarter of 1996, it was 4.7 percent and 4.1 percent in the third quarter of 1995. It was 3.6 percent in the third quarter of 1994. Four counties showed a decrease, one remained the same and one increased. Eleven market areas went up, twenty-five went down and one remained the same.

VACANCIES

Buildings with 200 or more units continue to have the highest vacancy, 4.3 percent, down from 5.3 percent for the previous quarter. Lowest vacancies continue to be in buildings with 2 to 8 units, 2.6 percent, up from 2.1 percent for the previous quarter. Historically, larger buildings have the highest vacancy while smaller buildings have lower vacancy rates. Buildings constructed after 1995 continue to have the highest vacancy, 6.8 percent, down from 8.2 percent in the third quarter. Generally, the older the building the lower vacancy rate. Apartment units with 1000 or more square feet have the highest vacancy rate, 4.9 percent, down from 6.6 percent in the third quarter. Units with 499 and below square feet have 2.1 percent vacancy, down from 4.4 percent in the third quarter. Efficiencies have 2.9 percent vacant; one bedroom, 3.5 percent; two bedroom, one bath, 4.1 percent; two bedroom, two bath, 4.7 percent; and three bedroom, 4.3 percent.

RENTAL RATES

The average rental rate for all apartments increased to $685.48 for the third quarter of 1998, an increase of $25.74 from the second quarter. This follows an increase of $7.47 for the second quarter and $2.66 for the first quarter. In the second quarter of 1997 there was an increase of $31.81. The average rate was $649.52 for the third quarter of 1997 and $596.47 for the third quarter of 1996. Average rents are based on units being unfurnished with residents paying gas and electricity. Average rents do not include the cost of rental discounts/concessions, models, bad debts, and delinquencies. For the third quarter of 1998, that amounted to 5.1 percent, down from 5.3 percent for the previous quarter. Units constructed since 1995 averaged $928.11; 1990-94, $921.57; 1980-89, $704.29; 1970-79, $589.36; 1960-69, $558.16; and prior to 1959, $461.34. Highest rent continues to be in buildings/complexes with 200 and up units, $751.84, and lowest in buildings with 9 to 50 units, $507.23. Buildings with 2 to 8 units averaged $646.55. Rent per square increased to 84 cents per square foot up from 82 cents for the second quarter. For the third quarter of 1997 it was 80 cents. The highest rent is for those units with 500 and below square feet, $1.05, and lowest for units with 1000 and above square feet, 81 cents.

NEW ADDITIONS AND ABSORPTIONS

Approximately, 1,412 units were added to the multi-family inventory in the third quarter of 1998. About 3,973 have been added in the first three quarters of 1998. A total of 3,526 units were added in 1997, and in 1996 6,445 were added. There are about 239,016 apartment units in the six-county area. For the third quarter of 1998 3,020 were absorbed. Absorption is the net change in the number of apartment units rented in the current time period (quarter/year) compared to the previous time period (quarter/year). For the third quarter (month of August) of 1998 the monthly resident turnover was 5.8 percent, down from 5.5 percent for the second quarter of 1998. For the third quarter of 1997, it was 6.2 percent.

OVERALL COMMENTS

The Denver metropolitan area apartment market continues to be very robust. With demand increasing, it has caused a significant increase in the average rental rate. The overall market has tightened up this quarter given the stability that we have had for the previous four quarters (all at 4.6 percent). Likewise the average rental rate had been relatively stable for the last four quarters. Usually, rental rates increase the greatest in the second quarter. However, the 1998 second quarter increase was small.

New apartment product is being absorbed readily in most market areas. More units have been added in the first three quarters of 1998 than in all of 1997. About 6,000 new units will be added for all of 1998. This will be the second highest yearly total number of new additions for this decade; 1996 had 6,445 units.

The Denver Area Apartment Vacancy and Rental Survey reports averages and, as a result, there are often differences in rental and vacancy rates by size, location and age of building/complex and apartment type. All information is based on data received for the month of September, except resident turnover and rental losses which is for August. The Survey is conducted by mail and includes only those units with a certificate of occupancy. The Third Quarter 1998 Survey includes information on 72,789 apartment units.

The Survey is possible because of the consistently outstanding participation of professionals in the apartment industry and the continued support of sponsors who are committed to the apartment industry. Comments on the Survey are welcomed.

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