OVERVIEW

The Denver metropolitan area apartment vacancy rate increased to 4.4 percent for the fourth quarter of 1998. For the third quarter the vacancy rate was 3.9 percent. For the previous four quarters including the fourth quarter of 1997, the vacancy rate was 4.6 percent. The vacancy rate for the fourth quarter of 1996 was 4.9 percent. For the fourth quarter of 1995, it was 5.0 percent and 3.8 percent for the fourth quarter of 1994. Three counties showed an increase and three counties showed a decrease. Twenty-five market areas had an increase, ten had a decrease, and two remained the same.

VACANCIES

Buildings with 200 or more units continue to have the highest vacancy rate, 5.0 percent, up from 4.3 percent for the previous quarter. Lowest vacancies continue to be in units with 2 to 8 units, 2.0 percent, down from 2.6 percent in the third quarter. Historically, larger buildings have the highest vacancy with smaller buildings having the lowest vacancy rates. Buildings constructed between 1990 and 1994 had the highest vacancy rate at 5.9 percent. Those constructed since 1995 had a vacancy rate of 5.7 percent. Generally, the older the building the lower the vacancy rate. Apartment units with 1000 or more square feet have the highest vacancy rate, 5.1 percent, up from 4.9 percent in the third quarter. Units with 499 and below square feet have the lowest at 3.1 percent. Efficiencies have 3.4 percent vacant; one bedroom, 3.8 percent; two bedroom, one bath, 4.7 percent; two bedroom, two bath, 5.3 percent; and three bedroom, 4.0.

RENTAL RATES

The average rental rate increased to $694.71 for the fourth quarter of 1998, an increase of $9.23 from the third quarter. For the fourth quarter of 1997, it was $649.61 and $607.28 for the fourth quarter of 1996. Average rents are based on units being unfurnished with residents paying electricity and gas. Average rents do not include the cost of rental discounts/concessions, models, bad debts, and delinquencies. For the fourth quarter of 1998, that averaged 5.2 percent, up from 5.1 for the previous quarter. Units constructed between 1990 and 1994 average $930.73 while those constructed since 1995 average $927.98. Units constructed between 1980-89 averaged $713.83; 1970-79, $593.83; 1960-69, $556.21; and prior to 1959, $479.31. Highest rents continue to be in buildings/complexes with 200 and up units, $750.66 and lowest in buildings with 9 to 50 units, $524.83. Buildings with 2 to 8 units averaged $639.93. Rent per square feet increased to 86 per square foot up from 84 cents for the third quarter. For the fourth quarter of 1997, it was 80 cents and 76 cents for the fourth quarter of 1996. The highest rent per square foot is for those units below 500 feet, $1.07, and lowest for units with 1000 and above square feet, 83 cents.

NEW ADDITIONS AND ABSORPTION

Approximately, 1,621 units were added to the multi-family inventory in the fourth quarter of 1998. About, 5,594 units have been added for all of 1998. A total of 3,526 were added in 1997 and 6,445 were added in 1996. There are about 240,637 apartment units in the six-county area. For the fourth quarter of 1998, 355 were absorbed. For all of 1998, 5,818 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 fourth quarter (month of November), the monthly resident turnover was 4.6 percent down from 5.8 percent for the third quarter. The average turnover for 1998 was 5.3 percent, down from 6.0 for 1997 and 7.1 percent for l996.

OVERALL COMMENTS

The Denver metropolitan area apartment market continues to be relatively strong. As was the case for this quarter, vacancy rates generally increase during the fourth quarter. The vacancy rate for units below the average rent rate continues to be very tight. For units that have rental rates above the average the vacancy rate is less tight. Rental increases also generally increase less during the fourth quarter as was seen with the fourth quarter of 1998.

New apartment product continues to be absorbed relatively well in most areas. It is interesting that units constructed since 1995 have a slightly lower vacancy rate (5.7) than those constructed between 1990 and 1994 (5.9). About 5,600 new apartments were added during 1998. For this decade this is second only to the 6,400 that was added in 1996.

The Denver Area Apartment Vacancy and Rent 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 December, except resident turnover and rental losses, which are for November. The Survey is conducted by mail and includes only those units with a certificate of occupancy. The Fourth Quarter 1998 Survey includes information on 73,463 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.

Click here for information on obtaining the complete Survey.