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Renters encounter apartment squeeze

By John Rebchook, Rocky Mountain News (Contact)

Published May 13, 2008 at 9:43 a.m.

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Apartment vacancy rates in the Denver area fell to 5.9 percent during the first quarter of 2008, from 7.1 percent a year earlier.

That's the lowest first-quarter vacancy rate since 2001, when the rate stood at 4.5 percent, according to the Apartment Association of Metro Denver and the Colorado Division of Housing's first-quarter report.

With demand growing, and little apartment construction in the foreseeable future, there could be an apartment shortage in the coming years, officials said.

"I think there is definitely going to be a shortage, especially in some geographic areas where the vacancy rate is really low, like downtown Denver, and demand is strong," said Kathi Williams, executive director of the Colorado Division of Housing.

"There are about 17,000 empty apartment units in the metro area, which maybe would house about 30,000 people," said Gordon Von Stroh, the business professor at the University of Denver who authored the report.

"That sounds like a lot, but those could be filled pretty quickly" by normal demand, such as people graduating from high school and college, and newly divorced people.

Median rents were $820.85 for the first quarter, up from $817.84 in the fourth quarter.

And that's not high enough to cover the cost of building new apartments, given the rising prices of such material as concrete, steel and asphalt, said Jerry Kendall of Countrywide Commercial Real Estate.

"Rents would need to be about 25 percent higher" to justify most construction, he said.

It's also been harder and more expensive to get financing for apartment construction since August, when the subprime market collapsed, he said.

"At first glance, the rental market in the Denver area is nearly back to where it was before the 2001 recession," Kathi Williams, director of the Colorado Division of Housing, said in a statement.

"The difference today is that the cost of construction is considerably higher than it was eight years ago, and it will be harder to build much new product that can be rented to middle-income renters."

There were 9,123 units added to the market in 2002. By contrast, only 2,262 units were added in 2007.

In the first quarter this year, 217 units were added.

rebchookj@RockyMountainNews.com or 303-954-5207

Denver area Q1 vacancy rates and rents

Area Vacancy Rent*

- Downtown 3.6% $1,117.47

- Denver, north central 2.4% $841.75

- Boulder 3.2% $924.27

- CU-Boulder 3.8% $882.67

- Broomfield 4.9% $774.09

- Arapahoe County south 4.8% $877.53

- Arapahoe County southeast 11.2% $1,064.11

- Castle Rock 6.7% $828.21

- Glendale 9% $753.88

- North Aurora 6.2% $1,005.66

- Lakewood south 5.3% $819.49

- Golden 5.8% $984.03

* For two-bedroom, one-bath unit

Comments

  • May 14, 2008

    8:29 a.m.

    Suggest removal

    Fred writes:

    sounds to me like the people trying to sell thier homes might do well to rent them until the housing market comes back.

  • May 14, 2008

    9:23 a.m.

    Suggest removal

    CWW writes:

    Yes, since there is a shortage, all the management companies will raise rents again. My apartment rent went up $200 a month in three years. That's why I'm renting a house now.

    Fred is correct---owners can't get the market value to sell their homes so they're renting them out instead. I'm paying the same for my house as I was in the apartment.