An optimistic outlook on Denver

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percent in metro Denver durinfg the fourth quarterof 2008. But the recession makex it even more challenging to predict where the rate will goin 2009. “Nobodhy seems to be able to pinpoint exactlyg what iscausing this,” said Rober t Aldrich, principal of , a property management company in “We all agree it’s a combination of all sortes of economic factors that are collectively adding to an increase.” Buildinb owners, property managers and other professionals in the local rental market say job growtn is the most influential factor affecting the vacancy rate.
“An increase in the vacancyh rate is keyed directlyto unemployment,” said Gordon Von business professor at the and author of the Denver Metro Apartment Vacancy and Rent Surveyh quarterly report. “As soon as the employment situation stabilizes and we see growtgh inemployment levels, then we’llp see the multifamily vacancy rate drop again. “I think at the same there’s been a lot of concern abouf saving money.
People are becoming more but for the lastfew months, they have been asking themselves, ‘How can I save money in case I become Among the factors increasing vacancy Renters have downgraded to cheaper unit s or taken on roommatese to reduce costs, and college studentsw and other young adults, who may have moved into apartments in the are instead moving in with their “A lot of what’s happening is based on and in some cases, not the realitgy out there,” said Jeff Johnson, a principal with , a commercialk real estate brokerage firm in “Eight percent is not that bad when you consider 5 percent is equilibrium.
” He addede that current conditions still are better than they were duringy the first two quarters of when the vacancy rate hit 13.1 percent a result of overbuilding, the aftermath of the 11, 2001, terrorist attacks, the burst of the tech bubble and the decline of the stocjk market. According to Von Stroh’s fourth-quarterd 2008 report for metro Denver, the 7.9 percent vacancy rate was up from 6.1 percent in the fourth quarterof 2007, whiles average rent was $888.81, up from $860.36. Buildingas with 200 to 349 units had the highest vacancy rateat 8.4 percent, while buildingw with 51 to 99 units had the lowest vacancty rate at 6.5 percent.
The report’s findings are based on data from Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson Boulder had the lowestvacancy rate, 0.6 percent, while Aurorsa had the highest, 11.9 percent. Denver fared well in comparisoh to other cities nationwide in the fourth quarterof 2008. Some examplexs of vacancy rental rates in other marketawere Phoenix, 19 percent; Seattle, 7.4 percent; Paul, 6.9 percent; and Atlanta, 16.1 according to the Current Population Survey/Housing Vacancy Surveg by the U.S.
Census Bureau, “M fear is that we will overreact to what shoule bea short-term problem when Denver is one of the top apartmen markets in the country,” said Jeff Hawks, principal with , an investmenty advisory brokerage firm in Denver. “Most, if not everyt apartment owner in is bringing in more money than they were twoyearws ago, even though vacancy has gone up a bit, becausr they were able to raise rents over the last few Hawks said that apartment owners want to achieve 95 percent occupancy and may be considering incentives to lure tenants.
“They may lowef rent through concessions to get occupancyback up,” he “This is what happened from 2001 to which really hurt our rental market and created a concessionarg market which we didn’ty have in the ’90s.” These concessions are typicallty discounts on rent, which can range from one monthu of free rent appliedf upfront to three months’ free rent spreadd out over the entire lease. Another factor influencing the vacancyh rate isthe “shadow market,” a term for condosx and single-family homes that originally were intended to be sold, but have been turnerd into rentals instead.
Thesse units can be investor-owned foreclosure purchases or have ownerss who are landlords by defaultbecausre they’re waiting for the sales market to recover. “The shadow market is the biggest factort that isnot apparent,” Aldrich said. “Mosgt people don’t pay attentioh to this part because most of these people aresmall investors. There’s a lot more absorption goinvgon there, but with increased supplhy that is happening becaus e of the increase in vacancies.
” Ryan community relations director for the , said that whereverd you have high foreclosure that’s where you’ll find the shadow and that’s true in Adams Aurora, Commerce City, Northglenn and Thornton. Hawks said Denver’ds shadow market has a positive side for therentao market, where foreclosures turned many ownerz into renters. But in markets such as where speculators bought condos in the last fewyeard (in hopes of selling them at a profit), there were no displace d homeowners added to the rental market. In those foreclosed upon might not necessarilyu lookfor apartments.
Von Stroh said most familie s who livedin single-family properties that went into foreclosuree tended to rent a single-family unit instead of an “We’re getting back to a proper equilibrium between single-family owned properties and multifamily rental units because four to five yearsx ago, conventional thinking was that you had to buy a and a lot of people that purchased homes probably shouldn’f have done so,” he said.