OVERVIEW

The Denver metropolitan area apartment vacancy rate increased to 4.7 percent for the fourth quarter of 2000. For the third quarter of 2000, it was 3.7 percent. The vacancy rate for the fourth quarter of 1999 was 5.2 percent, and for the fourth quarter of 1998, it was 4.4 percent. All six counties showed an increase in their vacancy rate this quarter. Twenty-seven market areas showed an increase and ten showed a decrease.

VACANCIES

Buildings with 350 and up units had the highest vacancy at 6.2, up from 4.0 percent. Buildings with 200 to 349 units had 4.5 percent vacant, up from 3.8 percent vacant. Lowest vacancies are in buildings with 9 to 50 units, 2.9 percent, up from 2.3 percent. Historically, larger buildings have the highest vacancy rates. Buildings constructed since 1995 had the highest vacancy at 7.9 percent, up from 3.9 percent. Those constructed between 1990 and 1994 had 4.7 percent vacant, down from 5.5 percent for the third quarter. Buildings constructed between 1960 and 1969 had the lowest vacancy rate at 2.8 percent, those constructed between 1970 and 1979 had 4.2 percent, between 1980 and 1989 had 3.6 percent, and between 1950 and 1959 had 5.0 percent vacant. Apartment units below 500 square feet had the lowest vacancy, 2.9 percent, while units with 1000 and more square feet had the highest at 6.4 percent. Efficiencies had 3.5 percent vacant; one-bedroom, 4.6 percent; two-bedroom, one bath, 4.5 percent; two-bedroom, two bath, 5.3 percent; and three bedroom, also 5.3 percent.

RENTAL RATES

The average rental rate increased to $792.67 for the fourth quarter of 2000, an increase of $30.64 from the third quarter of 2000. For the fourth quarter of 1999 it was $733.61, and $694.71 for the fourth quarter of 1998. Average rents do not include the cost of rental discounts/concessions, models, bad debts, and delinquencies. For the fourth quarter of 2000, that averaged 5.3 percent, up 0.2 percent from the previous quarter. Units constructed since 1995 averaged $1,028.35; 1990-1994, $1,046.37; 1980-89, $793.39; 1970-79, $692.37; 1960-69, $641.31; and 1959 and prior, $608.09. Highest rents are in buildings/complexes with 350 or more units, $860.91, and lowest in buildings with 9 to 50 units, $591.58. Rent per square foot increased to 97 cents per square foot. For the fourth quarter of 1999 it was 91 cents, and 86 cents for the fourth quarter of 1998. The highest rent per square foot was for those units below 500 square feet, $1.21, and lowest for units with 1000 and above, 93 cents.

NEW ADDITIONS AND RESIDENT TURNOVER

Approximately 2,565 net new units were added to the multi-family rental inventory for the fourth quarter of 2000, for a total of 5,626 for 2000. There are about 254,024 apartment units in the six-county area. For the fourth quarter 2000, there was a net negative absorption of 70 units. However, for the total year there was a net absorption of 6,604 units. 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 4.6 percent. For the fourth quarter of 1999, it was 4.7. For the year, the average monthly turnover was 5.1 percent. Over the last several years, the average monthly turnover has been trending slightly downward.

SUMMARY

As expected for the fourth quarter, the vacancy rate increased this past quarter. There is generally a strong upward change in the vacancy rate during the fourth quarter. The overall Denver apartment market remains relatively strong and stable. The vacancy rate for units below the average rental rate ($792.67) remains very tight. For units that have rental rates above the average rental rate, the vacancy rate has tightened up somewhat compared to the third quarter.

Rental rates climbed this quarter at a much higher rate then has been the case for the last several years. The overall increases for the last several years have generally been less than the increase in the per capita income for Denver metro residents. Recent average rent increases have been slightly above the increase in the Consumer Price Index.

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 2000 Survey includes information on 85,823 apartment units.

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

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