Denver Is Dealing with a Big Block of New Supply

 A total of 22 new apartment communities were completed in metro Denver during 2009. These new properties added almost 5,300 units to the area's apartment stock, expanding total inventory by 2.2 percent. The burst of deliveries followed a four-year span when Denver's completion tallies were fairly restrained, as deliveries had been held to an average of slightly fewer than 1,800 units annually during the 2005-2008 time period.

More than in most metros, then, there are select neighborhoods in Denver where new supply could fill a product niche that's gone unsatisfied over the past few years. On the other hand, it's tough to get new properties through initial lease-up at a time when the Bureau of Labor Statistics is reporting annual job loss at approximately 63,000 positions.

So how have Denver's brand new communities fared?

After leasing at new properties got off to a slow start during early 2009, momentum picked up as the year progressed, with considerable demand seen specifically during 3rd quarter. At 2009's close, then, almost all of the developments finished early in the year had about wrapped up initial leasing, leaving most of the vacancies specifically in communities where the last units weren't finished until 4th quarter.

Denver's calendar 2009 absorption of 4,440 units, in fact, occurred for the most part in the metro's new completions, though there was a little bit of backfilling of previous vacancies among properties from the 2000-2008 time frame, from the 1990s and from the 1980s. Net move-outs registered in 1970s-era communities and in developments built prior to 1970.

Looking at rents for Denver's new additions, prices certainly aren't at the levels that developers likely were expecting when construction was initiated. Furthermore, effective rents at most new properties did backtrack somewhat from the time leasing was initiated to the time it was finished, though the declines generally didn't go much deeper than the 5.3 percent loss seen in overall pricing power across the Denver apartment market during 2009.

While Denver only has seen one apartment start over the past few months, there's still a moderate block of not-quite-completed product that was begun mostly in the early to middle months of 2008. Scheduled deliveries in calendar 2010 total about 3,100 units.

Statistical information presented in this post is acquired, to some degree through property management systems and data collation at the city and county level.

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