Elevated Supply Levels in Denver Take a Toll on Rent Growth

The ongoing supply wave continues to dampen rent performance in the Denver-Aurora-Lakewood apartment market. Over the past four years, inventory in the market expanded an average of 3.5% annually, with the apartment stock growing an average of roughly 9,300 units a year. As a result, annual rent growth in the market has fallen to levels closer to U.S. norms – far from the double-digit increases seen in the market prior to the supply wave. From 2011 to 2015, Denver recorded some of the nation’s biggest rent increases, with rents growing roughly 6.5% to 12% annually, averaging growth of 7.8% per year during that period. That average annual rent growth was well above the norms for both the West region (5.3%) and U.S. (4.1%). Since then, rent performances in Denver have waned, with rents increasing just 3.2% annually, on average. That’s well below the West region norm of 4.2%, but in line with the U.S. average of 3.2%. Thanks to healthy demand, occupancy in Denver was not hit as hard. Still, occupancy fell from around 96% in 2014 to below 95% over much of the past four years. As of 2nd quarter 2019, Denver posted an occupancy rate of 95.3%. While that is considered essentially full, it was one of the weakest rates in the West region.