The Denver area is witnessing a shift toward affordability in the rental market, driven by recent trends highlighting a notable decrease in apartment rents.
Recent data from the Apartment Association Metro Denver reveals that average monthly rents in the metro area fell by $56 in the first quarter of this year, bringing the average rent down to $1,819, which is lower than the $1,870 recorded a year ago.
This decline is attributed primarily to the influx of 20,000 new apartments that entered the Denver market last year, marking a significant 5% increase in rental inventory.
Cary Bruteig, a researcher with Apartment Insights, notes that this surge in available units has led to an increase in vacancy rates, which rose from 5.8% to 7% over the past year.
When vacancy rates surpass the 6% mark, rental property owners tend to adopt a more conservative approach to rent increases, often entailing slower rent growth or even offering concessions to attract tenants.
Historically, Denver has added between 5,000 and 7,000 new apartments annually, but last year’s addition of 20,000 units was unprecedented.
Despite these new developments, the absorption of rental units has not kept pace with the influx, resulting in approximately 6,000 units remaining vacant.
Bruteig expressed surprise at the rapid absorption rates, stating, “I would not and did not forecast that we would absorb 50% more apartments over the last year than we did in the last 10.”
The last time vacancy rates reached 7% was around 15 years ago, during the recovery following the Great Recession, as noted by Mark Williams, president of the Apartment Association.
However, there are concerns about the future of the rental market, particularly due to recent job losses in Colorado, including a notable decline of 11,600 jobs in February alone.
According to the state labor department, the average monthly change in jobs over the last year is negative, pointing to a potential risk for the rental market should job growth not resume.
Williams emphasized the importance of job creation for rental demand, remarking, “When you continue to see job creation, those units are going to continue to get absorbed. If that declines, there will be a steeper concern for housing providers.”
Although overall rents have witnessed a downward trend over the past three years, a deeper analysis shows that the decline has primarily affected newer apartment properties.
For newer units built since 2020, average monthly rents have decreased by 7%, dropping from $2,516 three years ago to $2,340 today.
Conversely, rents for older properties have risen since late 2022, with the lowest rents found in 1970s-era buildings averaging $1,497 per month.
Property owners of newer apartments are responding to the competitive market by offering various move-in specials and concessionary deals to attract tenants.
An example is One River North, a 187-unit building that opened last year, which is currently offering 50% off rent for the first six months.
Similarly, the Art Studios in downtown Denver, which added 192 units, is promoting deals like ten weeks of free rent, a $500 Visa gift card, and a complimentary membership to the nearby Denver Art Museum.
According to Williams, “The renter has more power to negotiate,” resulting in landlords providing discounts extending to several weeks or even months of free rent to fill vacancies.
Looking ahead, the forecast indicates that rents are expected to continue their decline.
With nearly 31,000 apartment homes currently available in the Denver area, competition among landlords is heating up.
Williams characterized the current rental environment as a ‘renters market’ where individuals who previously relied on roommates or parental support are now seeking their own apartments.
Bruteig also indicated that landlords prefer to maintain lower rents to ensure higher occupancy rather than having units sit vacant.
He stated, “I do think rents will continue to fall. The properties just don’t want to be empty.”
Interestingly, holding rents lower may not be entirely unfavorable for landlords.
Despite Denver’s slow rent growth placing it in the middle tier nationally, its rent levels rank in the top third among the 100 largest cities in the United States, according to Apartment List.
Karen Arnold, a landlord with units in Aurora, commented on the current dynamics, stressing the importance of maintaining long-term tenants by keeping her rates below the average.
During the pandemic, Arnold even lowered her rents to assist tenants facing job losses.
Having raised rents only once in five years to accommodate increased insurance costs, she is currently considering raising rates to $1,500 due to three ongoing vacancies.
Arnold remarked, “I don’t believe that rents dropping is a bad thing. $1500 for a one-bedroom apartment? That’s soul-crushing for the individual who needs to pay it.”
In the broader context, falling rents in the Denver area represent a cyclical response to fluctuating market conditions.
Rob Warnock, a senior research associate with Apartment List, noted that the Denver market experienced a slight rent increase of 0.6% last month, while still reflecting a 6% decrease compared to last year.
He highlighted that prior to 2020, rents were escalating rapidly, driven by strong demand and significant investment in new apartment construction.
The current environment of declining rents follows a period of unprecedented supply expansion, marking a notable shift in the rental landscape.
Across the Front Range, most communities have also reported falling rents over the past year, with a few exceptions such as Highlands Ranch, which saw a marginal increase of 0.3%.
Areas like Weld County and Greeley experienced increases of 0.7% and 0.8%, respectively.
Nonetheless, many regions have observed substantial increases since March 2020, with notable hikes in areas such as Highlands Ranch, up by 25.8%, Castle Rock, experiencing a 23% rise, and Douglas County, which saw a 22.7% increase.
Conversely, Colorado Springs has reported a 4.8% decline in rents for one-bedroom apartments, with Denver County rents falling by 6.3% to an average of $1,456.
Warnock suggested that comparing one-bedroom apartments is preferable due to their prevalence in rental markets when evaluating pricing trends.
Cities like Chicago and New York City have seen rents grow by 4% and 5.5%, respectively, indicating local variations based on demand and supply dynamics.
Areas that haven’t matched Denver’s pace of new construction are experiencing upward pressure on rents due to constrained inventory.
Furthermore, the latest inflation statistics for the Denver area show an increase of 1.9% in March, which is slower than the national inflation rate of 2.4%.
While dining out and meat and egg prices rose significantly, a decline in energy costs contributed to the region’s lower inflation figures.
In the broader economic landscape, challenges persist as Colorado’s outdoor businesses face difficulties due to tariffs and economic conditions.
Additionally, the Colorado legislature is contending with a $43.9 billion budget that addresses healthcare costs while cutting funding to transportation and social programs.
An impending legislative measure has prompted Uber to threaten to exit the Colorado market, citing compliance challenges due to proposed safety regulations.
Moreover, new regulations will require Colorado drillers to recycle fracking water starting in 2026, a significant environmental step for the state.
In the realm of technology and accessibility, innovations are emerging, exemplified by the introduction of free American Sign Language services at state workforce centers to assist individuals with hearing impairments.
This pilot program utilizes a mobile app to connect users with live ASL interpreters, enhancing service access at all 32 Division of Vocational Rehabilitation locations and the state’s 46 Workforce Centers.
Amid these economic challenges, residents can find some solace in cultural events like Mile High Asian Food Week, which celebrates a variety of Asian cuisines across the Denver area.
As competitive pressures persist in the rental market and broader economic landscape, stakeholders are left to ponder the implications of these trends.
With uncertainty in the job market and ongoing fluctuations in rent prices, the call for nearby residents to participate in polls regarding economic sentiments highlights the community’s engagement with these pressing issues.
As the real estate and economic environment continues to evolve, one thing is clear: the impact on renters and landlords alike will shape the future of Denver’s housing market.
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