VACANCY & RENT
ron throupe | university of denver
2nd Quarter 2014 Overview
L
ast quarter we commented on the ability
to segment properties built since 2010
into a separate line item for reporting. We
will not be able to show detail on this
segment until more properties are reporting. For
now, as shown on the right, an aggregated description of 2010+ in comparison to other segments
within the “2000 to present” report line item are
shown. The 2010+ vacancy is skewed based on the
addition of properties in lease up, while the rent
difference is based on age and the amenity level of
new units in comparison to units built prior to 2010.
The new units recently completed or under construction have amenity packages that are not well represented, even in the 2010+ numbers. Rents for
these new units are in a $1.80 to $2.70 per square
foot range, depending on their location downtown
or along the I- 25/RTD corridor. These amenity
packages are now a focus for potential tenants and
even units built three years ago have difficulty comparing to the more elaborate and planned out facilities now being introduced.
Of note for this quarter is the increase in rent
change and the ability to absorbed new units as
they become available. The average rent change for
this quarter of approximately $44 per square foot
is greater than prior quarters, partly affected by new
class A units. In fact, some submarkets and unit
types ( 2 bedroom-2 bath) saw rent increases that
were double the average change. The absorption of
units for the quarter was as much as all of 2013,
negating the amount of new units entering the
market and resulted in the overall vacancy rate
declining from last quarter. Going forward we will
monitor job creation and the ability to absorb new
units in the Denver Metropolitan Statistical Area
market.
Given an increase in the number of new additions to the inventory this quarter and over the last
two plus years, the recent trend in the Denver
metro unemployment rate, normal seasonal vacancy changes, continued immigration, and an
increase in metro area natural population, rent
increase and a low vacancy rate are both expected,
with some variation across certain submarkets.
Historically the vacancy rate is higher in the fourth
and first quarters than the second and third quarters, which we see again this year. The number of
new units added to the inventory during 2014 as
expected increased, as seasonal construction was
completed and permitted construction obtained
certificates of occupancy. 1261 new units were
reported for this quarter. Thus as expected there
were jumps in sub markets vacancy while new units
are absorbed, but a slight decrease in the Denver
overall vacancy. The overall average rent for the last
ten years has increased from around $800.00 in
2002 to over $1,117.12 this quarter. The overall
vacancy rate was at 4.7%. Absorption was positive (3127) for the quarter. This amount is greater than all of 2013. The absorption and new
supply numbers will continue to be watched
closely with significant new additions expected
to the apartment stock over the next several
quarters. Economic vacancy did increase to 14%
partly as a response to competition and new unit
lease ups.
The Denver Area Apartment Vacancy and Rent Survey is
conducted via mail and online submissions. It includes only
those units with a certificate of occupancy. The second quarter 2014 Survey includes information on 118,700 apartment units. The Survey is possible because of the excellent
participation and help of professionals in the apartment
industry and the consistent support of the Survey sponsors.
Comments on the Survey are welcome at [email protected].
THANK YOU TO OUR VACANCY & RENT SPONSORS:
Colorado Division
of Housing
32 | TRENDS • AUGUST 2014
www.aamdhq.org