By Greg Johnson
Denver led the country in population growth last year, according to the Census Bureau report released in May 2015. This growth led to a fortuitous reversal on Denver’s previously-rising vacancy rate.
The Apartment Association of Metro Denver announced a surprising decline in the metro vacancy rate to 6.1% in its 1st Quarter report. The fall from December’s figure of 6.8% was the largest drop during the winter quarter since 2010. The decrease in the vacancy rate was attributed to the nearly 4,700 new renters that exceeded the new supply of 1,800 apartments constructed during the first three months of 2016.
Investor confidence remains high as we head into the summer months. The Central Denver apartment market is continuing its growth as average prices continue to trend upward. There are several factors contributing to the momentum, including demand outpacing supply. There also continues to be a shortage of buildings available for sale, and investors are lamenting the limited opportunities on the market.
Low interest rates are still fueling investor activity. In mid-June Chase Bank was quoting interest rates on 5-year loans below 3.50%. Low interest rates have held CAP rates down, which of course, contributes directly to higher sales prices.
The impact of record-level construction continues to be closely watched by industry experts. Owners and management companies are experiencing varied leasing results, and the market seems to be sending mixed signals. The larger management companies have reported stronger leasing traffic in May and June, while some independent owners have described lower-than-expected responses to their “for rent” postings on Craigslist. Large and small apartment owners agree that $1,200-$1,500 is the transition range; with apartments below $1,200 leasing quickly, and apartments above $1,500 renting not as easily.
Stay tuned for more market reports from our 2016 Q2 Newsletter. Email us for a copy of our Q2 Newsletter and for instant updates: firstname.lastname@example.org