Burst of Multifamily Supply Trims Rents in Denver

Developers have built so many apartments in greater Denver that empty units have hit a 16-year-high, with cascading rents across the city.

Builders have added 20,822 apartments in the past 12 months, driving vacancy in the Mile High City to 7 percent last quarter, from 5.8 percent late last year, the Denver Post reported, citing a report from the Apartment Association of Metro Denver.

At the same time, the average monthly apartment rent in greater Denver fell to $1,819, from $1,842 — and from $1,846 in the first quarter of 2023. Had typical rents risen with inflation, they’d be $1,951 a month.

“This occurred because we had such a strong and large construction pipeline,” Cary Bruteig, a researcher with Apartment Insights and author of the apartment association report, told the Post.

Apartment vacancy is the highest since the Great Recession of nearly two decades ago.

Douglas County has the lowest vacancy rate at 5.8 percent, while Denver has the highest at 7.7 percent.

In southeast Denver and west Aurora, vacancy tops 9 percent, with some older buildings 20 percent empty, with rents dropping to levels in 2017, according to Darren Everett, managing principal at Two Arrows Group.

While the lowest rents are in buildings built in the 1970s, the highest rents are in newer apartments in central Denver, where builders focused on multifamily construction.

“While the average apartment that was built in the ’70s has a rent of $1,497, there are many places that you can lease for under $1,000 per month,” Everett told reporters on a call hosted by the apartment association.

When building vacancy hits 7 percent, landlords typically reduce rents and offer more concessions to fill up units at lower rates, rather than leave them empty, Bruteig told the Post.

Historically, the market has absorbed 5,000 to 6,000 new apartments a year. In the past 12 months, it’s absorbed closer to 15,000. With 30,000 more apartments in the pipeline, it could take three to four years to rent them all out, according to the Post.

If the economy holds, it’ll be a renters’ market for another year or two, followed by a balance between supply and demand.

What worries Bruteig is that the high vacancy rate and rent decreases are more commonly tied to the start of a recession. Rising job losses would mean falling absorption. Renters would fail to keep up because of reduced incomes. More households would double up. And fewer people would move to Denver for work.

Absorbing the 30,000 apartments now under construction in greater Denver would take three years at the recent average — or closer to five or six years using the historical average, according to the Post.— Dana Bartholomew