Metro Denver apartment market holds steady even with construction surge

Metro Denver’s apartment market remained stable despite adding substantially more new units than it typically does in a quarter, according to an update Tuesday from the Apartment Association of Metro Denver.

The average rent in metro Denver rose from $1,846 in the first quarter to $1,878 in the second, an increase of $32. Over the past year, average rents are up 2%, which is below the 3% annual consumer inflation rate measured nationally in June.

Average rents were $1,717 a month in Adams County, $1,786 in Arapahoe; $1,980 in Boulder and Broomfield; $1,925 in Denver; $2,023 in Douglas and $1,886 in Jefferson County.

“The market has been stable over the past nine months, with fairly flat rental rates and a steady rate of vacancy,” Mark Williams, executive vice president for the AAMD, said in a release. “When the vast majority of costs are increasing all around us, to have rental housing be so stable is good news for renters and housing providers.”

The vacancy rate, a measure of the share of apartments that are unoccupied, went from 5.6% in the first quarter to 5.5% in the second. Vacancy rates ranged from a high of 6.1% in Douglas County to a low of 4.8% in Boulder and Broomfield counties.

A seasonal surge in demand from people graduating high school or college typically contributes to a tightening in the apartment market in the second quarter and that pattern played out again this year.

Metro Denver added 4,430 new units in the quarter and just over 8,000 in the first half, bringing the total inventory to 409,310 apartments. Over the past four years, the new supply has averaged 2,700 units a quarter, said Cary Bruteig, the report’s author and founder of Apartment Insights.

He estimates another 120,000 apartments should come online in the next few years in metro Denver, of which 45,800 units are currently under construction. If that pans out, it would represent a 30% surge in the supply.

“More new units help drive the vacancy rate up which helps take pressure off rental rates,” Bruteig said in the report.  “If vacancy rates continue to increase, and given the large construction pipeline they probably will, then rents are likely to either remain flat or decrease.”

That softening had been expected over the past few quarters, but demand has remained strong, resulting in the rental market outperforming expectations, Bruteig said.

Metro Denver is attracting fewer residents than it did before the pandemic. Denver County, in particular, has suffered one of the biggest decelerations in population growth of any major U.S. county.

Weaker migration should also contribute to a softer rental market. But higher mortgage rates, which reduce affordability, could be keeping more people who want to buy a home renting.

Get more real estate and business news by signing up for our weekly newsletter, On the Block.