The report shows that only Atlanta has more units under construction than Denver. Atlanta had 17,493 units under construction, while Denver has 14,320 units.
"The timing of this burst of building couldn't be much worse," says Greg Willett, M/PF's director of research products. "The metro's apartment leasing environment has already grown very competitive in recent months, as the struggling economy is slowing new household formation and triggering net move-outs in the apartment sector. Some top-tier apartments also are losing residents to home purchase, as still low interest rates continue to position home buying as an attractive option for those who feel secure in their jobs."
The M/PF Research count showed a steady stream of move-outs throughout 2001. The metro ending the year down 4,030 apartment renter households in comparison to the late 2000 tally.
In a dramatic reversal for what had been one of the nation's top-performing apartment markets, the occupancy rate in Denver dropped more than 4 points during 2001 to 93.2% as of December.
Developers are offering widespread rental rate concessions as a result of the rising vacancy rate.
Effective rent achievement dipped 0.1 percent during 2001, measuring change on a same-store basis (surveying the same properties in both December 2000 and December 2001). In contrast, rent growth had been running at a pace of 7% to 8% in 1999-2000.
Monthly rents in Denver now average $814, and properties built during the past decade command rates at a norm of $972.
Apartment occupancy dropped across every neighborhood in metro Denver during the past year. The biggest decline was in Douglas County, where especially aggressive building activity is occurring. Douglas County's occupancy rate declined 7 points in 2001, falling to 88.2%.
As a result, property owners are cutting the most aggressive deals, with a 4.7% decline on average.
The best performing neighborhood at the end of 2001 was North Aurora. While the area's 94.7% occupancy rate was down 2.5 percentage points from the year-earlier level, North Aurora did manage to achieve relatively healthy 3.5% rent growth during the previous 12 months.
It's somewhat surprising that North Aurora has fared so well because so much of the population depends upon the nearby Denver International Airport, which, like all airports, has suffered since the terrorist attacks of Sept. 11.
''That hasn't been reflected in the numbers so far,'' Willett tells GlobeSt.com.
Overall, he thinks the market will return to positive absorption this year. "However, the metro is not expected to come close to absorbing all of the new product scheduled for delivery,'' he adds. ''Look for further declines in occupancy and additional rent cuts."
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