Rents rising in Colo.

Report: Most markets healthy

John Rebchook, Rocky Mountain News

Wednesday, September 12, 2007

Most apartment markets in Colorado appear to be healthy, with vacancy rates falling and rents rising, officials say.

"I would say, overall, the market appears to be rather positive, and I think it will continue to move in a positive direction," said University of Denver business professor Gordon Von Stroh, who authored the second-quarter report for the Colorado Division of Housing.

But the overall state vacancy rate for the market areas surveyed increased to 8.8 percent at the end of the second quarter, from 7.5 percent at the end of the first quarter. Year-over- year statistics were not available Tuesday because this is the first time Von Stroh has done a statewide second-quarter report.

The overall increase is primarily because of seasonal increases in Fort Collins and Greeley, as students vacate apartments, Von Stroh said. But average monthly rents in Fort Collins rose to an all-time high of $800.88.

In the Denver area, the vacancy rate dropped to a six-year low of 6.2 percent, and Colorado Springs hit a five-year low of 9.6 percent.

"The only caveat would come from the single-family house slowdown," Von Stroh said. "Down the line, if there are fewer construction workers building houses, that could mean less demand for apartments from that sector."

A prolonged slowdown in housing also would mean fewer retailers selling such things as furniture, also reducing demand for apartments, he said, as many people working in the retail industry are renters.

The market is especially strong in Grand Junction, which has only a 2.1 percent vacancy rate because of economic growth fueled by the oil and gas industry.

Despite the low vacancy rate, there is virtually no construction of apartments anticipated in Grand Junction because the cost of building new units is still not justified by the rents, said Von Stroh and Ryan McMaken, spokesman for the Colorado Division of Housing.

Also, land prices are rising in Grand Junction, making it difficult to financially justify the construction of new apartments, Von Stroh said.