OVERVIEW

The Denver metropolitan area vacancy rate remained at 4.6 percent for the second quarter of 1998. It was also 4.6 percent for both the third and fourth quarters of 1997 and the first quarter of 1998. For the second quarter of 1997, it was 5.1 percent and 5.3 percent for the second quarter of 1996. For the second quarter of 1995, it was 4.3 percent. Three counties had rates that went up and three went down. Sixteen market areas went up, twenty went down and one did not change.

VACANCIES

Buildings with 200 or more units continue to have the highest vacancy (5.3 percent) while buildings with 2 to 8 units have the lowest (2.1 percent). Buildings with 2 to 8 units historically have the lowest vacancy while larger buildings generally have the highest vacancy rates. Buildings constructed after 1995 continue to have the highest vacancy rate (8.2 percent). Generally, the older the building, the lower the vacancy rate. Apartments units with 1000 or more square feet have the highest vacancy (6.6 percent) and those units with 500 to 749 square feet have the lowest (3.7 percent). Efficiencies have 4.1 percent vacant; one bedroom, 3.8 percent; two bedroom, one bath, 4.5 percent; two bedroom, two bath, 6.0 percent; and three bedroom, 5.7 percent

RENTAL RATES

The average rental rate for all apartments increased to $659.74 for the second quarter of 1998, an increase of $7.47 from the first quarter. This follows a $2.66 increase for the first quarter and $0.09 in the fourth quarter of 1997. For the second quarter of 1997 the average rental rate was $637.66 and for the second quarter of 1996 it was $597.81. Average rents are based on units being unfurnished with residents paying gas and electricity. Average rents do not include the cost of rental discounts/concessions, models, bad debts, and delinquencies. For the second quarter of 1998 that amounted to 5.3 percent, down 0.1 percent. Units constructed since 1995 averaged $908.09; 1990-1994, $916.92; 1980-89, $690.05; 1970-79, $575.23; 1960-69, $534.88; and prior to 1960, $451.59. Highest rent continue to be in buildings/complexes with 200 and up units ($717.38) and lowest in buildings with 9 to 50 units ($501.19). Buildings with 2 to 8 units averaged $640.61. Rent per square foot increased to 82 cents. For the second quarter of 1997 it was 78 cents, and for the second quarter of 1996 it was 75 cents. The highest rent is for those units with 500 and below square feet ($1.05) and lowest for units with 1000 and above square feet (79 cents).

NEW ADDITIONS AND RESIDENT TURNOVER

Approximately 938 units were added to the multi-family housing inventory in the second quarter of 1998. There are about 237,604 apartment units in the six-county area. For the second quarter, about 895 units were absorbed. Absorption is the net change in the number of apartment units rented in the current time period (quarter/year). For the second quarter (month of May) of 1998 the monthly resident turnover was 5.5 percent, up from the first quarter of 1998 (5.4 percent). For the second quarter of 1997 it was 5.6 percent.

SUMMARY

The overall Denver metropolitan area apartment market continues to be extremely stable with a vacancy rate of 4.6 percent for the last four consecutive quarters. Rental rates likewise remained stable with a relatively small quarterly rate increase. New apartment product has been absorbed for the last four quarters without any impact on the overall vacancy rate. One market area that has a vacancy rate greater than ten percent is a small market area with a relatively high number of new units. It is expected that those units will be absorbed in a relatively short time.

The number of new additions should be higher in 1998 than in 1997. In all of 1997, about 3,526 units were added. So far about 2,561 new units have been added. It is expected that about 6,000 new units will be added in 1998.

The Denver Area Apartment Vacancy and Rental Survey reports averages and, as a result, there are often differences in rental and vacancy rates by size, location and age of building and apartment type. All information is based on data received for the month of June, except resident turnover and rental losses from discounts/concessions, models, delinquents, and bad debts which are from May. The Survey is conducted by mail and includes only those units with a certificate of occupancy.

The Survey is possible because of the excellent participation of professionals in the apartment industry and the continued strong support of the sponsors. Comments on the Survey are appreciated.

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