Denver Rental News & Information

Is the Denver Rental Market Going to Bust? Statistics and Other Important Information For Your Investment Property.


By Colorado & Company General - December 11, 2018

December 2018 Update from Colorado and Company

With 2019 right around the corner, we have put together the following update for all our treasured clients and acquaintances at Colorado and Company.

The rental market has been shifting and we want to make sure you have the necessary information to make the best decision for you and your clients.

For starters, it is no surprise we have a healthy employment growth in Metro Denver. Per Metro Denver’s Economic update in August of 2018, As of July 2018, Metro Denver’s year-to-date employment had increased 2.6 % compared to 1.9% last year and Colorado is on track to rank 5th for employment growth in the Nation. Employment growth along with an amazing quality of life has resulted in Metro Denver’s population to continue to grow on average of 1.7% year over the past 10 years. That is 50,000 net new people each year. 

Despite the continued increase of population rental rates are on the decline for the year and vacancy rates are on the rise, resulting in investors finding it to take longer to find qualified renters and for lower rental rates

What is causing this counter-intuitive decline?

We think it is due to overbuilding of apartment buildings along with an increase of privately owned investment properties.  That being said, there is a major apartment building boom in Denver, making this increase in apartment buildings the second largest in the U.S., per capita. 

Statistics supporting our assessment:
  • Denver is 2nd Largest in Apartment building construction, per capita in the U.S.
  • In 2017, 13,348 apartments came onto the market
  • In 2018, the first three quarters delivered 8,448 units in the Denver metro area. There is a delay due to construction backups.
  • In 2019, projections call for 30,000 apartments over the next 30 months. 
  • 33% of apartments communities are high-end buildings.
  • 1 out of 7 downtown units come with the concession of one-month free rent
  • Average apartment and privately owned rental rates have decreased the 3rd Quarter

To clarify, we do not think we are in “doom and gloom” recession. The rental market is just softening and becoming far more balanced. Properties are still appreciating in value at a very healthy level. However, the “glory days” of Landlords leasing properties in a few days without much effort to highly qualified renters, and increasing their rental rates 10% year-over-year may be over. 

In today’s softer market Landlords must be strategic in avoiding vacancy loss, which can be much more expensive than a price drop. We recommend that owners, especially in direct competition with the apartment buildings, to market their properties at very competitive rental rates and be more flexible and open to
lease terms lengths, furnishings and pet conditions.

The shift in the market also means it has become more important than ever to hire an experienced and effective leasing agent. The days of throwing up a property on Zillow and Craigslist and receiving a flood of interest and qualified tenant right away are over. It takes an expert assessment and securing an effective rental rate along with the proper presentation of the property online to find the best-qualified tenants as quickly as possible.

Why should you continue to use Colorado & Company?  
Since 2016, rental inventory in MLS has nearly doubled. We, Colorado and Company (COCO), have leased 68 properties in the second quarter of 2018, and 200+ year to date, which is almost twice as many as our nearest competitor. As a result, COCO holds 16% of the overall market, the same percentage since 2016, while competing brokerages occupy 3% or less of the market. Inventory input is trending upwards, showing that more owners are using an agent to list their property and input into MLS.

Now, let’s talk average and median rental rates. In the third quarter, the average rental rate was $2,500/month, which is $100 less than in the second quarter. This is a 4% seasonal decline. The average rental rate is down $67 from the third quarter in 2017 to the third quarter in 2018, which is a 3% market decline. The second and third quarter market median rental rates for 2018 were $2,300, which remains consistent with 2016 and 2017 stats. Finally, our company’s median rental rate in the second quarter was $3,050, which is 33% over the market and an increase of 17% from the second quarter of  2017. Thus, our company consistently acquires much higher median rents. 

The Luxury Market
In the luxury market during the third quarter, the average cost per square foot for all of MLS is $1.5. The price per bedroom in Denver for an attached property is $1,723 and for a detached property is $1,117. However, in areas outside of Central Denver like Aurora, Castle Rock, Lakewood, and Morrison, the price per bedroom is anywhere between $680 and $760. And who dominates the luxury $5000+ market?  COCO remains on top with 44% of the listings in the second quarter of 2018. 

As for days on the market, COCO’s average in the third quarter of 2018 was 27 days, compared to the market average of 35 days. Currently Arvada, Centennial, and Boulder have the lowest days on the market, with 15 to 20 days (NOTE: this is DOM until a fully executed lease, not possession). Because of these patterns, we always recommend listing 60 days prior to when you wish to fill a vacancy!

Overall, properties are leasing for less than their list price and agents are more likely to get listed rental rates in the second quarter than in the third or fourth. Also, the highest list prices are consistent in May, which indicates a good time to lease. On the other hand, list-price drops tend to occur in November and February. In February 2018, we saw a huge drop and we expect to see the same in February 2019 as well, so, try to avoid listing during the winter. Overall, if you want to get full price and a higher rent per square foot, the second quarter, and specifically May, is the prime time to release your property.

Where to and not to invest 
Investing in townhomes in millennial-friendly neighborhoods like LoHi and RiNo lease up quickly as long as they are priced well and don’t have funky features. Family-friendly locations like Arvada, Centennial, and Boulder have the lowest days on the market. Also, Boulder currently enjoys the second highest average apartment rents. 

As of now, avoid Cherry Creek and the Golden Triangle, because the Apartment Association and COCO are seeing the largest decline in rents in these areas. As noted earlier, luxury apartments and condos are hurting the most; it’s smart to avoid those as well. Luxury apartments and condos are also struggling because they tend to compete directly with overbuilt apartment communities, which offers concessions compared to homes or townhomes and thus provides them with more benefits. 

Tenant Update 
It may be a given, but features such as backyards, dog- friendly, good surrounding schools, parking spaces, walkability washer/drying in unit, views, and rooftop decks all make up qualities that tenants seek in properties. As for features that are unappealing, the lack of dishwasher, no pets, no parking, shared or community washer/dryers, clawfoot tubs, lack of air conditioning, and dated finishes or furnishings all have the potential of turning tenants away.

Our Final Thoughts 
Before you go, a few important takeaways for all of our readers! The apartment building boom in Denver has caused rental rates to decline and vacancy rates to increase, which is a drastic change from what many investors have experienced in the most recent past. However, people are still moving to Denver and they are filling well priced and located properties. The leasing market isn’t crashing, it is just becoming more balanced. For 2019, we recommend that Landlords keep quality tenants if they are already in place, to be competitive in pricing and terms to compete with the Apartment Buildings and to stay optimistic. We know this market shift can be very frustrating for owners and hard to swallow after such a great rental market for so many years. However the market is still good compared to many cities, properties are still appreciating well, the rental market isn’t crashing, just balancing out, and our Economy is still healthy!

Many thanks to our clients, friends and referral sources! We are so grateful for your loyalty and humbled by your trust and support. Our success wouldn’t be where it is today without you. We strive to continue our excellence with care and execution that so many have come to count on as the leaders in the market.

 
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The Most Expensive Zip Code In Denver

Denver Rents in this Zip Code are the Most Expensive in the West

September 12, 2018

According to the Denver Business Journal here is an article about Denver Rent.

DENVER RENTS IN THIS ZIP CODE ARE THE MOST EXPENSIVE IN THE WEST

The most expensive places to rent in the western U.S. and in Colorado are all in the Denver-Boulder area, according to a new report from RentCafé.
Denver's 80206 ZIP code tops the list, with an average monthly rent of $2,435. The ZIP includes parts of Cherry Creek, Congress Park and historic Country Club is the highest in Colorado, although it did drop 0.7 percent from a year ago.

The second-most-expensive ZIP code in Colorado is 80209 in Denver, which includes Belcaro, Washington Park and Washington Park West. Rents in that ZIP average $2,151 and saw a year-over-year increase of 5.2 percent.

RentCafé compared average apartment rents for all of the ZIP codes in 130 major U.S. markets as of July. Although Denver had the hottest rents in Colorado, they’re far from the highest nationally. Manhattan ZIP codes dominated the list for priciest rents — the highest average rent being $5,657 in the 10282 ZIP — with Los Angeles, San Francisco and Boston ZIP codes well represented too. Other ZIP codes in cities with higher average rents than Denver include Austin ($2,658 in 78701), Seattle ($2,816 in 98101) and San Francisco ($4,666 in 94105).


Here's the breakdown of the 10 most expensive ZIP codes to rent in Colorado, with average rent and year-over-year change:

10. 80210, Denver: $1,817 (+0.9%) 
9. 80120, Littleton: $1,817 (4.8%)
8. 80216, Denver: $1,840 (+0.6%) 
7. 80238, Denver: $1,857 (–1.5%) 
6. 80211, Denver: $1,963 (+0.8%) 
5. 80301, Boulder: $2,044 (+5.4%) 
4. 80204, Denver: $2,075 (–2.6%) 
3. 80202, Denver: $2,138 (+1.4%) 
2. 80209, Denver: $2,151 (+5.2%) 
The Most Expensive Zip Code Is...

1. 80206, Denver: $2,435 (–0.7%) 
 
Photography credit Kristopher Lewis Photography
 
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September - Landlord and Tenant Trends in 2017

The Leasing Market is Softening

September 5, 2017

To our Colorado and Company Clients,

First and foremost, we want to acknowledge and thank you all for a great couple quarters here in Denver and Boulder. Your business and trust are of the utmost importance to us, and are very appreciated.Our intent, in this letter, is to keep you informed of the market trends we are seeing in the leasing markets, both from our analytics and impressions from our strong presence in the leasing market.
 
Rental Inventory Update
2017 has seen things change in the leasing world at a relatively rapid rate. As of mid 2017 the Downtown Denver Partnership has quoted that over 9,000 NEW residential units are being built downtown and a majority are apartments for rent. With the plethora of new apartment buildings being built in Denver and the metro Denver area, we are seeing rental rates shift significantly for the first time in many years. Privately held condos in the $2500-$4000 per month range have been hit particularly hard, and we are seeing a downward trajectory in their rental rates as apartment buildings are offering tenants incentives, flexible terms, and amenities, that are very difficult for our private owners to compete with. Generally speaking, we are seeing rents decreasing in the condo markets nearest these apartment communities, by $50 to $250 per month, depending on the size. Condos outside of these dense populations of new apartment buildings are being hit less hard, but are still seeing stabilizing or even downward trending rental rates. Tenants are savvy to this, using apartment pricing and incentives offered, to argue the pricing that privately held condos have been getting for years prior. They have many choices now, allowing tenants the luxury of selection and time, both of which did not exist prior.  Landlords are having to get used to multiple showings on their units, average days on market closer to 45 days, tenant's bargaining rental rate, and having to give up “no pets” clauses and such in order to pull in quality tenants. That is not to say that every type of condo is being hit hard. Affordable and micro-units are few and far between, and units that are priced from $900 to $1500 tend to move much more quickly, as they are highly desired, especially by millennials in a market saturated with a large inventory of overpriced luxury units.

Homes and townhomes are having less of a hard time renting, though they have not been left out of this downward rental rate trend. In the past two years specifically, as Denver has grown in popularity and homeownership has become more expensive, we have seen a definite trend upwards in investors purchasing properties to rent. This influx of rental property inventory has created a more balanced market, with tenants getting to choose from more properties. Due to this, days on market and potential vacancy loss have increased slightly and rental rates have not generally increased from the 2016 rental rates. Much as in the condo market, many owners are having to give up on luxuries they have had in the past, such as a “no pets” clause, as tenants find they have more options and power.


Tenant Update

The 2017 tenant trends in the luxury markets have also experienced some changes. The luxury market continues to have a stronger presence in the 35+ age range, though 20 somethings are becoming more frequent within a couple of specific scenarios. The tech and marijuana industries, along with employees having the ability to work from home, have brought forth some very well to do young tenants, who were not on the luxury radar before, and now are. Second, the younger tenants have really changed the face of roommates, and you will often find three or more of them asking to live together in homes. Owners who are open to roommates are finding they have more options than those who have restricted their tenant scenarios and can sometimes secure higher rental rates.

Some of the changing landscape with tenants includes animals specifically. As homeowners continue to use “no pet” clauses, pet owners are getting around it (both in a legitimate and non-legitimate manner) by establishing their animal as a service animal or emotional support animal. Both fall under the ADA and/or Fair Housing guidelines and a homeowner cannot reject, or charge a deposit on, an animal that has such a designation.  Registering an animal is easy and tenants know it, and many find it easier than arguing about a deposit. Cat owners continue to have a harder time finding a home, as Denver’s ever-increasing love of dogs dominates pet clauses in leasing. Homeowners who open their home to cats will likely find many people clamoring to see their property and willing to pay large pet deposits.

Lastly, as millennials start to dominate the pool of renters in Denver, multiple advantages to homeowners and investors have appeared. Homes that are clean, updated, and near to public transportation (e.g. light rail, bus, bike paths) tend to be more popular. Having seen the crash their parents went through, many millennials are seeking affordable housing situations in increasing numbers, doing so through being ok with smaller spaces in ideal locations, flexibility in term (e.g. being able to replace one roommate for another or move for a job) or multiple roommates in homes. They are not seeking the same things their predecessors have.  

Our Final Thoughts
The next two years will be a bit of a change for many homeowners seeking to rent their properties. As apartment inventory continues to flood the market in 2018, rental rates will likely not be increasing much, if at all, and are more likely to change positively for properties that are more desirable in specific ways and have less competition in their general price range or location. Marketing and presentation is going to become very important. Word of mouth, or simply using Craigslist, doesn’t work anymore and may cause higher rates of vacancy. As people become more tech savvy, and their phones and computers become their biggest allies in their rental searches, being present on multiple platforms and large networks, in addition to being professionally responsive is going to be incredibly advantageous. Additionally, those who are tech savvy, are also scam adverse, and will be looking for signs of a scam. Being able to provide a trustworthy face to your property will be important to those tired of scam artists looking for their money and social security numbers. Homeowners are going to have to learn to stick out, not blend in, so they are not lost in the mix of thousands of units as they come online this year and next. Lastly, homeowners and investors will have to become more flexible on terms as trends continue to favor tenants.

Thank you, as ever, our customers! We appreciate you!

Christina Freyer-Walker and Hadley Smith
President and VP of Colorado and Company Real Estate
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Downtown Denver Rents Tap Glass Ceiling


By Jonathan - September 28, 2016

The new rental housing that developers are building in downtown Denver isn’t exactly “cheap.” In a city lacking a reasonable amount of affordable housing, the unwillingness of newer developments to lower rents in the face of slowing demand seems illogical. As the second quarter drew to an end, supply of new inventory began outpacing demand, and since then, coupled with several macroeconomic factors, downtown’s rental market has experienced the most abrupt slowdown in absorption and rent growth since 2011.

In my quarterly review published in June, I indicated the downtown submarket was experiencing a “slightly overdue correction in pricing” — this observation was particularly true for the highly sought-after condo rental market, where prices peaked in 2015 through early 2016. Since then, rental prices for condos have dropped somewhat significantly due to competition from Denver’s new luxury rental properties, eager to fill high-priced rentals by offering generous move-in concessions and minimal security deposits. Many new properties are offering 1-3 months of free rent, gift cards, and various other incentives as tactics to acquire new residents.

A quick snapshot of the condo rental submarket for 12-month leases in downtown, Summer 2015 vs. Summer 2016 Activity:

Today, some of the macroeconomic factors leading the lull of Denver’s leasing activity include:
  1. Wages not keeping pace with rising rents
  2. Lack of inventory; First-time homebuyers, empty-nesters, and investors, continuing to compete for limited inventory – Driving prices and leading to mortgages exceeding what a property could lease for
  3. High cost for Developers to acquire and finance; Real Estate, construction labor, materials, supply and demand of general contractors and subcontractors
  4. Construction defects issues persist
  5. Rent control does not exist in Denver
  6. Weakening Oil & Gas Industry sector
  7. Notable recent sales and speculation of impending sales of large multi-family apartment complex properties
  8. The Presidential election in November
As new, high-priced supply continues to spill onto the market and outpace demand, concessions will remain the norm rather than the exception. I forecast this trend to continue through the Summer of 2017 in Denver and see a current vacancy rate of roughly 9%. For renters looking to relocate or renew leases, prices may still be high but there is plenty of competition and room for negotiation. Many apartment rental properties publish their real-time availability and pricing online, a perfect place to find current pricing and available comparable units in your building. Private owners and established multi-family properties with vacancies should be working closely with their Brokers and property managers to position their properties to lease at more affordable and competitive “market rates” heading into the historically slow winter months.

Denver is a city with a big appetite for growth. Several new downtown commercial projects with exciting spaces will be coming onto the market within the next 24 months, delivering tremendous new office square footage. New industries and companies relocating to Denver will continue to drive the need for more downtown housing. While a plateau and softening in the rental market is likely to persist for a while, glass ceilings are meant to be broken.
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Edbrooke Lofts


By Jonathan - August 31, 2016

Designed by renowned Denver architect Frank E. Edbrooke, the five-story 1905 warehouse received an additional floor in 1911. The building is constructed of molded and pressed brick and reflects elements of the Neoclassical Revival style in its massing and trim.


Edbrooke Lofts is located at 1450 Wynkoop Street, Denver, CO 80202

The warehouse was acquired and converted to residential lofts at the beginning of Denver’s lower downtown renaissance in 1990. As the original loft project in LoDo, Edbrooke Lofts boasts some of the largest loft-style homes in downtown Denver.

Rental Snapshot

2015 Average rental price per square foot: $2.11
2016 YTD Average rental price per square foot: $1.57

Source: REColorado.com
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