Colorado-Real-Estate-Journal_414122

INSIDE 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% $- $500,000,000 $1,000,000,000 $1,500,000,000 $2,000,000,000 $2,500,000,000 $3,000,000,000 $3,500,000,000 $4,000,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Sales Volume & Percentage of Supply Sold Sales Volume % of Supply Sold Colorado's middle market conditions are poised to see improvement Middle market New agency leadership directs renewed focus on housing affordability for Coloradans Affordable housing PAGES 25-30 A return to the glory days is in sight with reasonable construction costs, rent growth Land market PAGE 8 August 2024 PAGE 6 by Jill Jamieson-Nichols The vacancy rate decreased for sta- bilized apartment properties in the Denver metro area during the second quarter but rose to an all-time high when adding properties in lease-up, according to Apartment Insights’ Apart- ment Trends Summary. “There are now a record number of apartments in lease-up, with a larger percentage of vacant units than normal due to the recent wave of new apart- ments,” said Cary Bruteig, a partner in Apartment Insights. Overall apartment vacancy in the Denver metro area jumped to 11.37% due to a 6,500-unit increase in lease-up inventory – the highest number record- ed in the survey’s 20-year history. The vacancy rate for stabilized properties was just 5.55%. With 30 new properties hitting the market, rental concessions also were up in the second quarter, and effective, or net, rents saw a moderate increase. Concessions increased from $29 per month in the first quarter to $45 dur- ing the second quarter, a 2.3% discount from gross rents. Concessions for prop- erties built in the 2020s averaged 3.6%, or $77. That brings concessions to their highest level since the peak of COVID- 19 and, excluding the pandemic, the highest level since 2010. Although the pipeline of new con- struction is slowing, a significant num- ber of new apartments are set to hit the market again in the third quarter, according the Apartment Trends Sum- mary. The number of units under con- struction in the second quarter totaled 40,863, compared with 42,855 in the first quarter of the year and the peak of 45,801 units a year ago. There were 256 properties with 61,731 units in planning in the Denver metro area, down from 261 properties and 62,486 units in the first quarter. The survey includes properties of 50 or more units. Absorption of new apartment units remained strong in the second quarter. There were 3,569 conventionally oper- ated apartment units absorbed, well above the 1,785 units absorbed during the same period a year ago. The trail- ing 12-month absorption expanded to 9,349 units, the highest level in eight quarters, the survey noted. Including tax credit and student apartments, annual absorption was 10,028 units. Gross rents also held up well during the quarter, but effective rents were down from the same period a year ago, their first annual decrease in three years. The average monthly rent in the Denver metro area increased by $30 to $1,928 in the second quarter, which is $23, or 1.2%, higher than a year ago. There was a smaller increase in the average effective rent, which went up $14 to $1,883 per month. That is $8 per month lower than a year ago, for an annual decrease of 0.4%. “This appears to be a result of a surge in new apartments being delivered to the rental market that are competing with each other by offering concessions, forcing existing prop- erties of that age to similarly compensate by offering conces- sions,” said Bruteig. There also are a “larger percentage of vacant units than normal due to the recent wave of new apartments,” he said, noting vacancy in highest in the newest communities. The Cherry Creek submarket had the largest rent increase during the quarter, $68, moving the average monthly rent in that submarket to $2,149. Golden followed with a $63 quarterly increase, growing its average rent to $2,308 – the second-highest in the metro area behind Boulder’s $2,327. Only four of the 33 submarkets had rent decreases, with the Denver Inter- national Airport submarket leading the decline at $15 per month and averaging $1,988. During the second quarter, there were six sales of apartment commu- nities 50 units or larger, bringing the six-month total to 19 vs. 13 during the first half of 2023. The number is well below the 40 sales that occurred during the first six months of 2022, the report noted. For the half-dozen properties that sold in the second quarter, the aver- age price per unit was $246,421, and the average price per square foot was $303.68. The 5.5% vacancy rate for stabi- lized, conventionally operated apart- ment properties was a 23 basis point improvement from the first quarter but higher than the 5.44% recorded during the same quarter last year. The Denver northwest submarket had the highest vacancy, 7.15%, and the lowest was in Boulder south, 3.16%. s New inventory creates increase in apt. vacancy Gross and effective rents were up during the second quarter, but effective rents saw their first annual loss in three years, according to Apartment Insights’ Apartment Trends Summary. Rental concessions increased from $29 in the first quarter to $45 in the second quarter, a 2.3% discount from gross rents. Cary Bruteig