The average rent for a Denver apartment has fallen in recent months, from $1,371 in the second quarter to $1,368 in the third quarter, according to a new report from the Apartment Association of Metro Denver.
The decrease might not be much, but it’s unusual for this time of year, and it’s happening across most of the region.
The reason: There are more than 16,000 vacant apartment units in metro Denver, AAMD found. Builders have put up more units in the last three years than in the 11 before that combined, the organization announced.
Rents would be even lower by now except that so many of the new buildings are luxury communities.
Also, the average rent has grown since last year, by about 5.8 percent if you compare the third quarters. However, that still represents a slowdown: The year-over-year increase in September 2015 was nearly 13 percent.
“This is a milestone in Denver’s real estate cycle,” said Teo Nicolais, a Harvard University instructor who specializes in real estate, as quoted in an Apartment association news release. “In simple economic terms: demand far exceeded supply in recent years, but with all the new homes being delivered, supply is starting to catch-up.”
This slowdown also comes as fewer people may be moving to Colorado. The Denver Post found that the number of new transplants captured by IRS data shrank by 22 percent in 2015 compared to 2014. (We’ll have to wait and see about this year.)
Also, developers are still hungry for apartment projects. Remember when Breakers Resort sold for $350 million?
And yet one category continues to see low growth: There have been very few new condominiums built, according to the apartment association.
The group blames this on Colorado’s construction defect laws, and also warns of similar consequences from the city’s plan to implement an affordable housing fee. We’ve seen mixed reactions to that concern, including one analyst who said the extra cost would do little to deter developers.