OVERVIEW

The Denver metropolitan area apartment vacancy rate increased to 5.2 percent for the fourth quarter of 1999. This is the highest that it has been since the second quarter of 1996, when it was 5.3 percent. For the fourth quarter of 1998, it was 4.4 percent. The vacancy rate for the fourth quarter of 1997 was 4.6 percent, and for the fourth quarter of 1996, it was 4.9 percent. All six counties showed an increase in the vacancy rate. Twenty-eight market areas showed an increase, eight showed a decrease, and one remained unchanged.

VACANCIES

Buildings with 350 and up units have the highest vacancy at 5.7 percent. Buildings with 200 to 349 units have 5.2 percent vacant. Lowest vacancies are in buildings with 9 to 50 units, 2.5 percent. Historically, larger buildings have the highest vacancy rates. Buildings constructed after 1995 had the highest vacancy at 8.7 percent, up from 5.6 percent for the third quarter. Those constructed between 1990-1994 had a vacancy rate of 5.1 percent. Buildings constructed prior to 1940 had the lowest vacancy rate at 2.2 percent, and those constructed between 1960 and 1969 had 2.7 percent vacant. Apartment units below 500 square feet have the lowest vacancy, 3.0 percent, while units with 1000 and more square feet have the highest at 7.2 percent. Efficiencies have 4.5 vacant; one-bedroom, 4.7 percent; two-bedroom, one bath, 4.3 percent; two-bedroom, two bath, 6.4 percent, and three bedroom, 6.9 percent.

RENTAL RATES

The average rental rate increased to $733.61 for the fourth quarter of 1999, an increase of $8.61 from the third quarter. For the fourth quarter of 1998 it was $694.71, and $649.61 for the fourth quarter of 1997. Average rents do not include the cost of rental discounts/concessions, models, bad debts, and delinquencies. For the fourth quarter of 1999, that averaged 5.2 percent, up 0.2 percent from the previous quarter. Units constructed since 1995 averaged $972.82; 1990-1994, $941.87; 1980-89, $737.20; 1970-79, $622.50, 1960-69, $579.50; and 1959 and prior, $552.42. Highest rents continue to be in buildings/complexes with 200 to 349 units, $810.19, and lowest in buildings with 9 to 50 units, $552.99. Rent per square foot increased to 91cents per square foot. For the fourth quarter of 1998 it was 86 cents, and 80 cents for the fourth quarter of 1997. The highest rent per square foot is for those units below 500 square feet, $1.12, and lowest for units with 750 to 1000 square feet and 1000 and above, 88 cents.

NEW ADDITIONS

Approximately 1900 net new units were added to the multi-family rental inventory for the fourth quarter of 1999. There are about 248,398 apartment units in the six-county area. For the fourth quarter, there was a negative absorption of 1,897 units. This is the first time since the first quarter of 1997 that there has been a negative absorption. Absorption for the all of 1999 was 5,432. About 7,761 new units were added in 1999. This is the largest number of new units added on an annual basis since 1985. 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. For the fourth quarter (month of November), the monthly turnover rate was 4.7 percent. For the fourth quarter of 1998, it was 4.6 percent. The annual turnover rate for 1999 was 5.2 percent compared to 5.3 percent for 1998 and 6.0 percent for 1997.

OVERALL COMMENTS

Even though the vacancy rate increased somewhat this past quarter, the overall Denver apartment market remains relatively strong. There is generally an increase in the vacancy rate during the fourth quarter, and with the significant increase in new additions in 1999, the overall increase in the vacancy rate is not surprising. The vacancy rate for units below the average rental rate ($733.61) remains very tight. For units that have rental rates above the average rate, the vacancy rate varies significantly.

Rental rates have continued to climb, but at a rather moderate rate. The increases have generally been less than the increase in the per capita income for Denver metro residents.

The Denver Area Apartment Vacancy and Rent Survey reports averages, and, as a result, there are often differences in rental rates and vacancy rates by apartment type, size, location, and age of building/complex. All information is based on data received for the month of December, except for resident turnover and rental losses, which is for November. The Survey is conducted by mail and includes only those units with a certificate of occupancy. The Fourth Quarter 1999 Survey includes information on 81,404 apartment units.

The Survey is possible because of the great participation of professionals in the apartment industry and the consistent support of the Survey sponsors. Comments on the Survey are welcomed.

Click here for information on obtaining the complete Survey.