Vacancy rate decreases as rental activity picks up

Phil Castle, The Business Times

Cindy Hoppe

A decline in apartment vacancy rates during what’s typically one of the slowest periods of the year indicates increasing activity in the Grand Junction market.

“From a rental standpoint, I think we’re very healthy,” said Cindy Hoppe, manager of Bray Property Management in Grand Junction.

According to the latest results of a survey conducted for the Colorado Division of Housing, the average apartment vacancy rate in Grand Junction dropped to 7 percent for the fourth quarter of 2011. The latest rate is down from 7.7 percent in the third quarter. At this time last year, the rate stood at 7.5 percent.

Apartment vacancy rates were lower, however, in the first and second quarters of 2011 at 6.3 percent.

A vacancy rate of 5 percent is considered an equilibrium between supply and demand.

Hoppe said the fourth quarter decline defied what’s usually an increase associated with a slow period for rental activity. People are less likely to move during the winter months or holiday season.

Rental activity has picked up, however, with more people relocating to the area, she said. And as fewer people qualify for mortgages, more turn to apartments for housing, she added.

Hoppe said she expects the trend to continue, especially during their busier spring and summer months. “I’m definitely not seeing decreasing activity.”

For the fourth quarter of 2011, average apartment vacancy rates were lowest in Grand Junction at 0 percent for efficiency apartments and highest at 8.7 percent for two-bedroom, two-bath units. Vacancy rates ranged from 0.8 percent for small buildings with two to eight units to 9.7 percent to large buildings with more than 100 units.

The average monthly rent in Grand Junction stood at $640.28 during the fourth quarter. That figure was down $15.30 from the third quarter, but up $23.70 from the fourth quarter of 2010.

While rents have risen 3.8 percent over the last year, Hoppe said she doesn’t anticipate larger increases because wages in the Grand Junction won’t support them. Given rising costs, apartment owners will realize smaller margins, she added.

For the fourth quarter of 2011, average monthly rents in Grand Junction ranged from $226 for efficiency apartments to $890.87 for three-bedroom units.

Average monthly rents were lowest at $603.06 in large apartment buildings with 100 units or more and highest at $728.72 for small buildings with just two to eight units.

The apartment vacancy rate in Grand Junction during the fourth quarter was the second highest among six metropolitan areas in Colorado.

The vacancy rate was highest at 7.3 percent in Pueblo and lowest at 3.4 percent in the Fort Collins and Loveland area. The vacancy rate stood at 5.4 percent in Denver.

The combined apartment vacancy rate for the six metro areas fell to 5 percent. The combined rate declined six-tenths of a percent from a year ago to slip to the lowest level since surveys began measuring the fourth quarter in 2007.

Compared to the same quarter last year, vacancy rates dropped in every metro area except Greeley, where the rate rose from 5.1 percent to 6.4 percent.

“We’ve seen year-over-year drops in vacancies in all metros except Greeley for at least the past four quarters,” said Ron Throupe, a real estate professor at the University of Denver Burns School of Real Estate and Construction Management who compiled the latest apartment survey results.

“Markets have begun to respond with new construction, but little of that has come online so far,” he said.

The average monthly rent in Grand Junction was the second lowest among the Colorado metro areas. Only Pueblo was lower at $535. Average monthly rents were highest at $973 in the Fort Collins and Loveland area and $932 in Denver.

The statewide average rent for Colorado stood at $900, an increase of 3.2 percent from a year ago.

While average rents across the state have increased as vacancy rates have decreased, the gains have varied.

“The overall trend in rent continues upward and rent increases in Fort Collins, Greeley and Colorado Springs were quite substantial,” said Ryan McMaken, a spokesman for the Colorado Division of Housing. “This is likely to continue in the near term as more households look to rental housing and in-migration from other states remains strong.”