Lots of new construction is on the horizon for Colorado’s Front Range. So the question is, “how will this new construction going impact the rental market?” Vacancy rates have increased slightly as a result of the additional inventory. Landlords who have been remodeling older buildings, are adding these units to the rental inventory, and thereby increasing the vacancy rates. As a result of the newer nicer product the average rental rates have increased which is good news for investors.
A healthy balanced vacancy rate is considered to be about 5%. This rate keeps owners and tenants in check, and gives owners the ability to maintain the housing stock with repairs, while not having to give large concessions for signing up new residents. When the vacancy rate drops too low, the rental rates tend to spike, hurting residents ability to secure adequate housing at reasonable prices. Inversely, when there are higher vacancy rates, like those we have experienced over the past 7 years, landlords had a hard time maintaining their housing stock and were forced to provide large signing concessions, and struggled to balance basic upkeep with diminishing quality of available tenants. This downward spiral is very difficult for many apartment owners to balance, as landlords become strapped with diminished cash-flow.
Statewide we are hovering with vacancy rates just over the 5% mark, at 5.4% in the last quarter of 2013. This is up a little bit from the vacancy rate of 5.2% in the fourth quarter of 2012. The increased vacancy overall seems to be a good sign since it is a reflection of the new and updated apartments being made available for residents. Some newer amenities being offered to residents are free cyber café’s with in house barista’s, free wireless, cool new dog parks with fun features and even dog washing stations aka Pet Spas, larger storage lockers for all of your Colorado toys, laundry facilities with text messaging when your load is done, larger package lockers with text notification of your code to access your package. Of course all of this comes at an increased cost. The average rent has hit a record fourth quarter high of $992 for the state, this is up from $944 in the fourth quarter of 2012.
A Local Look at Rents & Vacancies Across Colorado
Fort Collins/ Loveland outpaced Metro Denver for Average rent. Fort Collins/ Loveland was $995 in the fourth quarter compared to Denver at $992. The vacancy rate dropped to a new ten year low of 2.1% making for an extremely tight market for residents.
Greeley had a record $64 increase in the average rent to $756 in the fourth quarter and an increased vacancy rate with a 2 year high of 6.3% but these statistics were invariably affected by the addition of 90 new units to such a small submarket. Overall Greeley is very strong and the absorption of these units should increase the average rent overall while updating the housing stock.
Vacancy rates dropped again this year to 3.4% for the fourth quarter of 2013 down from 3.7% in the fourth quarter of 2012. The vacancy rate for the area surrounding CU in Boulder dropped from 2% in the third quarter of 2013 to 0% in the last quarter of 2013. The average rents in Boulder/ Broomfield steadily rose from $1,104 in the last quarter of 2012 to $1,198 in the last quarter of 2013.
Vacancy rates in Denver have risen to a two year high of 5.2% for the 4th quarter of 2013 up from 4.9% in the fourth quarter of 2012. This is a strong reflection of the large number of new apartments being added to the inventory as well as remodeled units being held vacant during the construction process. The average rent continued to grow despite the increased vacancy which is the best indicator that the market can absorb the new inventory. The average rents rose from $986 in the fourth quarter of 2012 to $1,041 in the 4th quarter of 2013.
Overview of the vacancy rates and average rents by Area/ County for the 4th Quarter 2013:
Area/ County Vacancy Rate Average Rent
Fort Collins/ Loveland 2.1% $995
Greeley 6.3% $756
Adams 5.3% $948
Boulder/Broomfield 3.4% $1,198
Denver 6.1% $1,064
Arapahoe 5.2% $995
Douglas 5.0% $1,236
Jefferson 4.6% $994