I wrote a post toward the beginning of the year about Denver Investment Properties 2013 outlook, so let’s take a quick look about how 2013 actually wrapped up with apartment vacancy and rent.
Vacancy Rate: Ending Fourth Quarter, we saw a slight vacancy rise to 5.2% from 4.4% last quarter. Vacancy is always highest in this fourth quarter and usually lowest in the summer, so this remains consistent with previous years. We’re seeing two-bedroom, two-bathroom units at the highest vacancy rate (5.7%) and efficiencies and one-bedroom units at the lowest vacancy rate (4.9%).
Historically, larger apartment buildings have higher vacancy rates, and this was evident in the stats from this quarter: Buildings with 200-349 had a vacancy rate of 5.6% and buildings with 9-50 units had a vacancy rate of 3.4%.
This slight jump in vacancies could be a result of the 832 new apartment units that were reported for this quarter.
Average Rent: Typically we see average rent decline very slightly from third quarter to fourth quarter, and this year was no exception, but overall this trend is very favorable for landlords.
In 2013’s fourth quarter, rental discounts and concessions averaged 7.7%, which was down from 8.8% from the third quarter.
Higher Expectation of Apartment Amenities
New Denver apartment units cropping up in the metro area are starting a bit of an amenities war as we are seeing many of them featuring gyms, commercial kitchens, basketball courts, dog parks, espresso machines, roof top bars, and pool areas.
However, it has yet to be determined how these new amenities will effect rent prices (how many of these amenities will be absorbed into the rent, and how much will that bump rent rates?). Currently, these rents are hovering around $2.60 per square foot (though there may be room to scale back) in contrast with the current metro average of $1.23 per square foot.
As far as the apartment war on amenities, we expect to see these newer, amenity-rich complexes to win the occupancy war in the beginning until existing complexes begin discount entry rents. Because of this, we’ll see some swings in occupancy rates throughout the summer.
In either case, Denver real estate development certainly keeps us on our toes. If you are looking for Denver apartment buildings for sale or for Denver real estate development, give me a call or send me an email to discuss how we can get you in on this new Denver apartment action.
Brian MacMillan: Investment Specialist
Denver Investment Properties