Some landlords of newer Denver apartment buildings are hoping a 25 percent discount on a year’s rent is a deal too sweet to pass up.
Tenants in the metro are increasingly seeing offers for free rent for up to three months, with the average incentive near the three-to-four week range. Denver’s rental market hasn’t seen this degree of concessions in 15 years, according to the Denver Post. The reason? A major boost in apartment supply and sliding rent prices.
According to the Apartment Association of Metro Denver’s annual Vacancy and Rent Report, housing rents have dropped in three of the last four quarters. Since last year, average rent throughout the metro is down 5 percent, to $1,816 per month. According to the report, rents are at their “lowest levels since the first quarter of 2022.”
Scott Rathburn, president of Apartment Insights, told the Post that the incentives are drawing tenants out of older apartment buildings and into new ones for relatively similar rents.
“This is impacting the entire market,” Rathburn said. “You’re seeing basically what I would call a move-up effect, or a ladder effect, where the newer properties are offering significant concessions and that’s bringing their effective rents down.”
According to the report, the average concession amounts to 5.8 percent of the stated rent, the highest level since 2010, when the metro was coming out of the housing crisis. Yet, Denver’s vacancy rate is falling, from 6.4 percent to 6.3 percent between the second and third quarters this year. The vacancy rate hit its peak of 6.9 percent in the fourth quarter of 2024.
The region added 20,000 new apartments last year, twice as many as recent annual averages. More apartments could be on their way, too. Last month, Los Angeles-based Luzzatto Company purchased the Denver Energy Center, a pair of 28- and 29-story office towers in downtown Denver, with plans to convert the commercial space into housing units. The purchase price of $5.3 million emphasized the city’s distressed office market. The towers had sold for $176 million in 2013, and in 2022, JP Morgan Chase Commercial Mortgage Securities Trust bought the properties for $88.2 million in foreclosure.
Luzzatto told the Denver Business Journal that the falling office market “positions these office buildings as prime targets for residential conversions where the numbers make sense.”
The Denver Energy Center marks just one of Luzzatto’s planned office-to-residential conversions in Denver. In April, his company also bought a pair of nearby office towers on 17th Street, with plans to convert the buildings into an affordable housing complex with 750 units.
— Christopher Neely
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