DENVER-The metropolitan area apartment vacancy rate fell to 7.7% in the third quarter, a four-year low, shows the third-quarter Denver Metro Apartment Vacancy & Rent Survey. The survey, authored by Gordon E. Von Stroh, a professor at the Daniels College of Business at the University of Denver, was in the third quarter of 2001, when the average vacancy rate was 6.8%, shows the report. Since then, the vacancy rate topped out at 13.1% in the first and second quarters of 2003.

For comparison, the vacancy rate in the second quarter was 8% and in the third quarter of 2004 it stood at 8.5%. However, the economic vacancy rate, which is defined as the vacancy rate plus concessions and other write-offs as a percent of gross potential rent, actually rose in the third quarter to 24.9% from 23.5% in the second quarter of 2005. A year earlier the economic vacancy rate as 24.5%. Von Stroh says that is because landlords are offering more incentives to draw in tenants in the third quarter. Landlords want to be prepared for the winter months, which typically are the softest for rental activity.

Buildings with nine to 50 units had the highest vacancies at an average of 10.3%, up from 10.1% in the second quarter. Buildings with 200 to 349 units had the lowest vacancy rate at 7%, down from 7.8% in the first quarter. "Historically, larger buildings have the highest vacancy rates," Von Stroh notes. This shows that owners of large communities, such as those in Douglas County, are offering a lot of incentives. In other parts of the market, such as much of the Northeast corridor and in Jefferson County, there are very few incentives being offered, he says.

Meanwhile, the average monthly rental rate rose to a record $845.83 in the third quarter, up 2.3% from $826.49. And rates are up 3% from a year earlier, when the average rent was $820.90. However, the average rents do not include the cost of rental discounts and concessions, models, bad debts and delinquencies. For the third quarter, those costs average 17.3%, up from 15.4% for the previous quarter. As expected, newer units, those built between 2000 and 2004, commanded the highest rent at a monthly average of $1,035.99. Overall, rents average $1 per sf.

The median rents, rose to $802.74 for the third quarter, up from $785.72 for the second quarter. In the third quarter of 2004, the median rent stood at $779.40