October 21-November 3, 2015 —
COLORADO REAL ESTATE JOURNAL
— Page 7
Greater Denver
by John Rebchook
The Denver area apartment
market boasted mostly strong
statistics in the third quarter,
but there are signs that the
apartment vacancy rate, now
hovering just over 4 percent, is
poised to rise.
“Most statistics were quite
positive,” Cary Bruteig of
Apartment Appraisers &
Consultants and Apartment
Insights said in his third-quar-
ter apartment report, released
earlier this month.
“While vacancy remained
essentially flat this quarter,
there are indications that the
low for this cycle has been
reached and that vacancy is
likely headed higher,” Bruteig
said in his report.
The overall vacancy rate at
the end of the third quarter was
4.18 percent. That is 27 basis
points higher than the 3.92 per-
cent at the end of the third
quarter of 2014.
However, it was not a sur-
prise that the vacancy rate rose,
year-over-year, as the third
quarter of last year was the
only quarter in the past 15 years
in which the rate had dipped
below 4 percent.
The third-quarter vacancy
rate was up a fraction from the
4.16 percent vacancy rate in the
second quarter.
That marked the first time in
seven years that the vacancy
rate had not fallen in the third
quarter from the second quar-
ter, Bruteig noted.
Washington Park showed
the biggest decrease, with its
vacancy rate falling to 5.66 per-
cent from 6.86 percent in the
second quarter. The vacancy
rate had moved up due to a
“surge in new supply,” Bruteig
noted.
Wheat Ridge also saw a big
drop in its vacancy rate, fall-
ing to 2.64 percent from 3.74
percent.
Only Southwest Denver has
a lower vacancy rate, at 2.44
percent.
Other metrics tracked in Bru-
teig’s third-quarter Statistics/
Trends report include:
Absorption
The market absorbed 2,360
units in the third quarter, the
third highest pace in the past
five years. Downtown’s central
business district absorbed 603
units, the highest in its history.
Far more units were absorbed
in downtown than any other
submarket, Bruteig pointed out.
Rents
“Rents continued to increase
at a torrid pace,” according to
Bruteig. The average monthly
rent hit a new high of $1,313 in
the third quarter. The average
rent per square foot was $1.52,
also a record.
The 12.3 percent annual
growth rate was among the
highest in the U.S., but was
below the record of 13.1 percent
posted in the first quarter.
Older and less expensive
units are becoming more popu-
lar, driving down the vacancy
rates in those properties, he
said.
“With effective rents up
almost 70 percent during the
last six years, renters are search-
ing out the most affordable
options across the metro area,”
according to Bruteig.
Sales
Investors bought 2,233 units
in the third quarter, more than
a 50 percent drop from the 4,593
units that sold in the third quar-
ter of 2014.
However, on a recent bus tour
of apartments that Bruteig led,
he noted that is not because
investor appetite has waned,
but rather because more big
properties sold a year earlier.
There simply are not as many
large apartment communities
available to be purchased, he
explained.
Indeed, Terrance Hunt, a bro-
ker with ARA Newmark, said
he expects total sales will top
$4 billion for the first time this
year, because apartments are
selling at record prices, which
will offset fewer units selling.
The biggest sale last quar-
ter was for 1000 S. Broadway,
which was purchased by Gold-
man Sachs-Archon Group for
$64.6 million in July. The sale
price equated to $248.46 per
unit and $269.40 per sf. Grey-
star manages 1000 S. Broadway.
Other News
n
The
Simon Property Group
next year plans to start con-
struction on the $134 million,
1000 S. Broadway was the biggest sale in the third quarter.
Denver’s CBD had record absorption in the third quarter. Shown is the
Elan Union Station in downtown.
