With vacancies declining, developers are increasing the number of apartments they’re building, particularly along the newly opened T-Rex light-rail line.
The apartment vacancy rate for the first quarter this year was 7.1 percent, down from 7.4 percent during the first quarter last year and the lowest since the first quarter of 2001, according to statistics released Thursday by the Apartment Association of Metro Denver.
Developers are on pace to add 1,700 units to the market by the end of the year and another 2,400 apartments next year, said Steve Rahe, first vice president of investment properties in CB Richard Ellis’ multiple-housing group.
That’s considerably more than the 738 units delivered last year but still far fewer than the historic average of about 4,100 apartments built each year.
“The cost of construction has been so high, and if you look at the period of 2001-05, the economy and other markets were so down that rents had fallen significantly,” Rahe said. “You can’t real ly justify a lot of new construction until rents come back up. It looks like we’re at the beginning of that cycle of rents coming up.”
Rahe predicts the vacancy rate will drop to less than 5.5 percent by the end of the year, which would prompt increased construction of new apartments.
Most of the construction now underway is along the new southeast light-rail line. That’s also where vacancy rates are among the lowest in the region. In the southern part of Arapahoe County, for example, the vacancy rate is 5.6 percent. In the southeast portion of Denver, it’s 7.1 percent.
San Diego-based Fairfield Residential has three projects with about 150 units under construction in Denver and is considering several others, said Scott Blythe, the company’s vice president of risk management.
“Rents are good, and with interest rates sort of rising and the subprime market the way it is, you’ve taken a lot of buyers out of the market,” Blythe said. “Where are they going to live? They’re going to live with their parents or in apartments.”
But rising construction and land costs mean most of the new buildings coming on line are unaffordable to many people in the rental pool, said Ryan McMaken, community-relations coordinator for the Colorado Division of Housing. Renter median income is $32,765, about half of what the area median income is.
The average rental rate of $1,500 a month makes the Denver Tech Center attractive to professionals, but service workers can’t afford it.
“We’re really trying to find ways to address the shortage for median-renter-income people,” he said.
Staff writer Margaret Jackson can be reached at 303-954-1473 or mjackson@denverpost.com.
1,700
Apartments to be added to the metro area in 2007
2,400
Apartments to be added to the metro area in 2008
738
Apartments added to the metro area in 2006
4,100
Historical yearly average
