Property management companies in the Denver metro area are beginning to see stabilization in the rental market after a year of rapid growth in which over 100,000 new residents moved to the state overall. For renters, this is good news; for property management companies, it was expected that the unprecedented growth of the rental property market in Denver would eventually even itself out.
According to Cary Bruteig of the private firm Apartment Insights LLC in Denver, property management companies will begin to offer renters some concessions on new leases. New renters will have more choices in hot neighborhoods like Capitol Hill and their rental dollars will go slightly farther. Compared to last year, the occupancy rates in metro Denver have decreased slightly. According to Bruteig’s data, the vacancy rate in the first quarter for the metro area was 8.9 percent, including properties in the lease-up phase. This figure is one percent higher than the vacancy rate for the metro area a year ago.
Property management companies in Denver have likely been anticipating this stabilization for some time. From May 2014 until May 2015, only Oakland, California and Portland, Oregon saw faster rent property growth than Denver. In order to keep up with demand for multifamily housing, more of these units are being constructed in the metro area than ever. Analysts say that the construction boom has begun to take an effect on the rental market as we settle into 2016. By the end of the year, Bruteig estimates that about 11,000 new units will enter the market due to this construction boom. Last year, 9,200 units appeared during the massive influx of new residents to the Denver area. If rental rates stay the same, Bruteig expects about 3,000 units to be available out of the approximately 300,000 units in the city.
With construction finally catching up to demand for new housing in the Denver metro area, it appears the rental rates will begin to decrease. The change will be gradual. People are still moving to Denver in droves, and many want to live in the inner city, near downtown, keeping rental rates in the heart of the city relatively high. Property management companies will likely have to lower some of their rents for some of their units over the next year or more and offer lease concessions to renters.
Again, for apartment hunters trying to move to Denver or simply find a new place to live in the city, the construction of new units throughout the city to keep up with demand is beneficial. There will be more choice in the market for types of units in different parts of the city, particularly near downtown. Rental prices will level off and give apartment hunters more options with their rental budgets. The construction sector in Denver responded well to the thousands of newcomers to the state in the past year and is finally starting to turn the tide in keeping up with demand.
Property management companies shouldn’t despair, however. Because demand will likely remain high in 2016, there will still be plenty of new applicants to live in rental properties throughout the city. Denver is one of the fastest-growing cities for a reason. Young people will continue to move here in search of jobs in the booming technology, healthcare, and energy sectors over the next few years according to most studies, meaning that even with an influx of new units throughout the city, rental companies can still expect a high occupancy rate in their properties.
Rental prices in Denver by no means stand at the edge of some precipice. With demand remaining strong, the construction of new units will only serve to keep rental prices from climbing into the stratosphere, which could cause more serious problems in the future. With more options throughout the city, rental rates will simply level off, as is natural in a healthy housing economy. The rules will remain the same: the property management companies that improve their rental properties and add new options for renters will continue to thrive even with a slight downturn in rental prices and companies relying solely on the extremely high demand for housing in metro Denver will struggle.
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