2021 second quarter Denver Metro Apartment Vacancy and Rent Report
Researchers at the University of Denver’s Daniels College of Business released the second quarter Denver Metro Apartment Vacancy and Rent Report, which showed a spike in rent and a decrease in vacancy—two trends seen across the country as COVID-19 restrictions are lifted.
Results from the standard survey showed the average rent increased from $1,543.59 to $1,651.44 since the first quarter. The year-over-year change from second quarter 2020 ($1,505.71) resulted in a yearly increase of $145.73. Median rent increased from the first quarter of 2021 ($1,483.28) to the second quarter ($1,579.93) for a positive change of $96.65. Year over year, there was a median rent increase of $125.96.
“Although it’s common to have seasonal rent increases for the second quarter, the current results are extraordinary,” says report author Ron Throupe, associate professor of real estate at the Daniels College of Business. “The results are influenced by multiple dynamics taking place, including the relaxation of COVID-19 restrictions, a shortage of single-family units, as well as price increases, which result in affordability issues for some renters to purchase. Also, the movement of populations within the U.S., as well as inflation in service costs, maintenance and property taxes are putting pressure on owners to raise rents.”
The Metro Denver apartment market showed an overall quarterly decrease in vacancy to 3.7% from 5.5%, with a year over year decrease of 1.4% from 5.1%. Vacancy reduction was observed in all submarkets with a few exceptions because of new units in lease up.
Ron Throupe
“The current vacancy rate is approximate to what is called frictional vacancy, a vacancy based on turnover of units. Frictional vacancy is considered the lowest vacancy can drop,” Throupe says. “We are also seeing a reduction in unit turnover, now at 3.4%, which leaves a small percentage of vacancy for other reasons. This suggests that renewing tenants are experiencing rent increases.”
The Denver Metro apartment market added 2,495 new units of inventory but could not keep up with an influx of renters who absorbed a whopping 10,298 units for the quarter. The overall net absorption of units last year was 8,195, while the total net absorption for 2021 is now approaching the boom year of 2018, which saw 13,708 units absorbed.
“We are now entering a new period of dynamics to play out,” Throupe says. “The year-over-year results show that the Denver market rent growth, which has been slowing since 2016, is now on the rise. It is yet to be seen if wage inflation will compensate for the increase in rents shown for this quarter.”
Rental loss from delinquency, bad debt and concessions rose from 7.9% (first quarter 2021) to 11.6% (second quarter 2021).
“This increase shows an underlying dynamic of renters who can no longer pay, followed by increased rent for tenants who replace the prior tenant,” Throupe says. “A further erosion of rent payment next quarter would indicate that job loss, reduced work or other COVID-19 effects may be reaching a decision point for economic recovery. Likewise, a flattening of rent nonpayment would indicate an economic recovery may be starting.”
The Denver Metro Area Apartment Vacancy and Rent Survey is conducted by the University of Denver’s Daniels College of Business and Colorado Economic and Management Associates. It’s published by the Apartment Association of Metro Denver.
For interviews with Ron Throupe, please contact Kristal Griffith at kristal.griffith@du.edu. To obtain a copy of the Denver Metro Area Apartment Vacancy and Rent Survey report, please contact Christopher Dean, vice president of communications for the Apartment Association of Metro Denver, at 303.329.3300, or visit www.aamdhq.org.