Thousands of new apartments continued to pour onto the market in metro Denver last year, pushing down rents and pushing up vacancy rates to their highest level in seven years, according to the Denver Metro Apartment Vacancy and Rent report for the fourth quarter.

Metro Denver absorbed 11,821 new apartments last year, up from 11,056 in 2016. That represents the most in records going back to 1981, although the 1970s had years with more robust construction.

“These are the largest years on record in the survey, and I am told we would need to go back to the 1970s to find numbers of this monster magnitude,” Ron Throupe, associate professor of real estate and construction management at the University of Denver’s Daniels College of Business, said in his report.

For the second quarter in a row, both the average and median rent for an apartment in metro Denver fell, while vacancy rates shot up 6.4 percent from 5.4 percent in the third quarter and 5 percent in the second.

The average rent dropped to $1,396 at the end of December versus $1,420 at the end of September, while the median rent fell to $1,353 from $1,370.

“Rents are stabilized. You are seeing the free marketplace work. There is a lot of demand for apartments still in Denver,” said Mark Williams, an executive vice president Apartment Association of Metro Denver.

For the entire year, apartment rents in the region rose on par with overall consumer inflation. If rents continue to soften as home prices and interest rates ratchet up, that could provide an advantage to renting over buying.

Denver had an estimated 21,541 vacant units at the end of last year, the most since 2009, when the recession was weighing on the economy.

Vacancy rates haven’t been this high in about seven years and in markets with heavy new construction, the rate is much higher. Castle Rock reported a vacancy rate above 25 percent and in northwest Denver it was above 30 percent in the fourth quarter.

“The record-breaking levels of new construction has been pushing vacancy up and that, more than anything else, has been what’s keeping Denver’s rents in check,” said Teo Nicolais, a real estate Instructor at Harvard Extension School, in a statement.

Williams said builders completed 13,348 units, 38 percent more than the 9,692 built in 2016. The association estimates there are 131 apartment communities under construction with 31,000 units in the pipeline.

The expectation is that the market will see another 10,000 to 12,000 new apartments delivered this year, Williams said.

Rents continue to vary widely. Northwest Denver with lots of new high-end construction had an average rent of $1,848, but not far away in Wheat Ridge, an older market, rents averaged $974.

With so much new supply coming, apartment developers need net migration to hold up. There are signs, however, that higher housing costs and congestion are motivating more people to leave the region.







