Rents Rebound from a Year of Doldrums
BY RON THROUPE
INDUSTRY
The first quarter Denver Metro Apartment Vacancy and Rent report showed an increase in rent along with a decrease in vacancy . This market result is a common occurrence for the first and second quarter of the year . Nevertheless some may have questioned the continuation of this seasonal trend amidst the COVID-19 phenomena . These current data reflects market condition as of March 10 , 2021 , with the exception of turnover and COVID data , which are from February , and December 2020-March 2021 , respectively .
The Metro Denver apartment market showed an overall quarterly decrease in vacancy to 5.5 % from 5.8 %, with a year over year decrease of 0.4 % from 5.9 %. The Denver Metro apartment market added 859 new units to inventory , a relatively low number . Net absorption was a respectable 2205 units for the first quarter . This is a low quarter of unit production and may reflect delays in projects since the onset of COVID-19 . Monitoring of the “ pipeline ” of future unit production is in order to judge future supply vs demand dynamics . The overall net absorption of units for the year 2020 was 8,195 , a decline from the 10,829 absorbed in 2019 , which was also a declining year . In fact , unit growth is now in decline from the 13,708 absorbed in 2018 .
The first quarter is historically the quarter where we tend to see the start of rent increases for the year , resultant of move outs associated with home buying and location changes . And also this year , general concerns surrounding COVID-19 related effects , such as work locations and virtual work allowing greater geographic choices for where someone chooses to live . For this quarter , with continuing COVID-19 effects , the average rent increased to an overall average rent of $ 1543.59 , from $ 1510.26 for an increase of $ 33.33 from the fourth quarter results . The year over year change from first quarter 2020 ($ 1535.70 ) results in a yearly increase of $ 7.89 . Median rent increased from fourth quarter 2020 is $ 1449.01 to $ 1483.28 for a positive change of $ 34.27 . For year over year , there was a median rent increase of $ 7.85 . The year over year results underlie that the Denver market rent growth , which has been slowing since 2016 , had a percentage change of one-half of one percent for the year . This is less than inflation measurements , emphasizing that quarterly rent increases , when put in perspective of seasonal changes vs yearly changes , show potential for wages increases to outpace rent growth .
Covid-19 and Renters Making Due , Where do They go in the Future
In a continuing survey segment , we perform a separate survey of COVID-19 effects . The participants for this quarter were again asked about the delinquency patterns for this reporting time period . We added the prior surveys to examine if any trends emerge .
The results show in the below graph how over time the percentage of renters with COVID-19 rent related delinquency or non-payment has stabilized for the majority properties . The majority of respondents saying their results show less than 5 % of tenants not paying .
We mentioned in the last report that housing choices would likely become an issue to watch going forward . This is yet to play out , but with a calming of COVID-19 related issues , firms planning on where people will work in the future , and how much office vs home , it will start to show over the next set of quarters . Coupled with still low interest rates for home purchasing , and Millennials now in overdrive to purchase a home , after many delayed family life compared to prior generations . However there is a lack of single-family homes available . This motivated us to start a question on tenant move outs and if low interests rates for housing was a factor . The graph below gives some insight for this quarter compared to last . There is some uptick in interest rates being a factor and we expect more going forward as we move into summer months .
Economic vacancy ( physical vacancy , concessions and writeoffs ) rent loss , rose to 14 % for the quarter in contrast to 10.9 % for the fourth quarter and 13.3 % for the first quarter of 2020 . This measurement deserves future monitoring as Covid-19 effects such as potential move outs or rent concession dynamics play out .
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