According to the Denver Post, the number of units reducing asking prices increased by half a percentage point nationally from the same time last year. While the national change isn’t much to write home about, according to the Denver Business Journal, Denver has experienced a 3.1% drop in one bedroom apartments.
Some experts say this is due to an oversupply of new units. Real Estate Professor Glenn Mueller says “Last year, there was demand for about 8,000 units and 10,000 were built. [This year] there is demand for 9,000 units and we are putting up 12,000.” Producing more supply than there’s demand for slows rent increases, and in this case even causes a slight decline.
Rents in the Denver Metro Area have drop just about $20 to an average of $1,293 for all units. The current quarter shows a rent increase of 8.6% from the same time last year. While the overall year-over-year increase is still high, it’s still 12.5% less than the increase seen during the third quarter.
In addition to a slight dip in price, Denver has also seen an increase in concessions such as a month of rent free. Third quarter concessions came in at $5 per month and current numbers show an increase to $18 per month, almost 4 times higher!
So what does this mean for you as a property owner?
Although there is a bit of a surplus and a slight dip in rents, absorption rates in Denver show demand to still be high. Apartment insights show numbers for the 4th quarter absorption rates at 1,470 units, the best 4th quarter performance in 11 years. This means drastic change won’t happen overnight.
The numbers point to a softening of the Denver rental market, but high demand won’t allow a dramatic drop in rent. It’s also important to keep in mind the seasonality of the 4th quarter. There have been a lot of new apartments opening during a time when most people try to avoid moving and price increases slow generally.
As a property owner, it’s important to be patient. A small drop for a quarter doesn’t mean a crashing market especially when numbers show high demand. The Denver rental market as recovered incredibly well. According to Rent Jungle, rents for all apartments in Denver have increased $430 in the past 5 years.
If you’re looking for more information on the state of the rental market in Denver or considering hiring a property manager, get in touch today!