Apartment rents are expected to rise by as much as 19 percent this year as vacancy rates drop, landlords wipe out incentives and investors pay more for buildings.
“Rents are going to go way up, even if they just reduce the concession loss,” said Tom Luinstra, president of Denver-based Apartment Finders International.
The vacancy rate for the fourth quarter increased to 7 percent and the average monthly rent was $849.89, according to the Denver Metro Apartment Vacancy & Rent Survey released Tuesday. That’s down from $865.75 in the third quarter, when the vacancy rate was 6.7 percent.
But, Luinstra said, people typically don’t move in November and December, and he expects vacancies to drop and rents to start rising by the second quarter of this year. The increasing number of people who are relocating to Denver from California and elsewhere will push vacancies lower and rents higher.
That’s luring investors from across the country, said Steven Rahe, first vice president of investment properties in CB Richard Ellis’ multi-housing group.
“They’re betting with their investment dollars that rents are going up,” Rahe said.
During a typical year, investors spend about $700 million buying apartments in Denver. In 2006, they spent $2 billion, Rahe said.
Since 1996, average gross rent has increased 40 percent from $607 to $850, Rahe said. But the amount investors are paying has increased 151 percent, from $37,752 per unit to $94,834 per unit, during the same period.
By comparison, the average price of a single-family home has increased 85 percent during the same period, from $133,400 to $247,600, Rahe said.
Staff writer Margaret Jackson can be reached at 303-954-1473 or mjackson@denverpost.com.
