Denver Rental News & Information

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

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.

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


What Renters need to know about DepositIQ

By Jonathan - July 27, 2016

Security deposits are commonplace with nearly every residential lease. Recently, some buildings in Denver have been offering a substitute for traditional security deposits by referring renters to DepositIQ. Instead of requiring a full security deposit, renters have the option of promising to return the unit in good condition and satisfy all rental and financial obligations of the lease by paying a one-time, non-refundable premium for a Surety Bond.

The benefits of DepositIQ include:
  • Reduces upfront costs of lease occupancy
  • Bond is good for the life of residency
  • No wait for a security deposit refund
  • Covers the renter up to a certain amount in damages, including a lease-break
  • Example: A two-bedroom rental apartment in metro Denver might require a $400 security deposit. A Surety Bond can be purchased for approximately $140 and covers damages up to $750.

Apartment owners can substitute a lower-priced bond for a security deposit, allowing a tenant to move in with reduced upfront money. If anything happens during tenancy, DepositIQ will cover the apartment owner for its portion of the damages. DepositIQ then bills the tenant for what they paid, and even proceeds to collections in delinquency, thus allowing the apartment owner to operate with less liability and relieving them of turnover headaches.

DepositIQ is designed for apartment owners, not renters. While renters pay a fraction of what a traditional security deposit may be, what is paid to DepositIQ is non-refundable. Think of it as apartment security insurance, you pay in money in case something happens, and DepositIQ covers you up to the agreed upon amount in case something happens. Here’s where the fine print screws the renter; If something does happen to the property, DepositIQ will cover you for that amount, and, bill you the difference for what they do cover. So that $140 upfront that you wasted on a Surety Bond could lead to more charges on the way out, possibly leading to a difficult mediation process. At least with a security deposit there is a more realistic chance of getting some or all of your deposit back.

Above all, read the fine print. Have your Attorney read the fine print before you sign a contract. Would you be surprised to learn your apartment owner was receiving some sort of kickback for offering this option? DepositIQ is a shitty deal wrapped in pretty paper. Always do your own due diligence.

SPARK Artful Living – Interest List

By Jonathan - June 30, 2016

Here is a great opportunity to purchase a brand-new residential home in Denver!

SPARK offers a fresh new eco-friendly residential development that will feature a 19,500 sq. ft. internal park, energy-efficient solar panels, private, gated yards, underground parking, urban community gardens and a greenhouse along the 2500 block of Lawrence Street, the former site of The Big Wonderful in the Curtis Park / RiNo neighborhood of Denver. The development will consist of 99 residential condos and townhomes. Prices will start in the high $200,000’s.