While U.S. apartment vacancies rose to their highest level in 22 years, Pikes Peak region apartments were filling rapidly.
Analysts at Reis Inc. tracked 79 markets throughout the country and 45 experienced increased vacancies. The survey listed Colorado Springs; Columbia, S.C.; New Haven, Conn.; and Birmingham, Ala., as the U.S. cities with the fastest-shrinking vacancy rates.
The Springs’ overall vacancy rate dropped to 8.47 percent during the second quarter for complexes of 50 units or more. That was down from 9.9 percent during the prior quarter.
It’s also the lowest vacancy level since 2006, according to multifamily broker Doug Carter of Sperry Van Ness who cited findings published in the latest Apartment Insights quarterly review published by Cary Bruteig.
Some areas of town fared better than others.
Security-Widefield-Fountain finally saw its rental ship come in after 11 consecutive quarters with an average vacancy rate of 14.18 percent. Not surprisingly, Fort Carson’s new and returning soldiers leased hundreds of units.
Likewise, the southwest submarket — mostly 80906 neighborhoods — saw vacancies drop to less than 5 percent, filling even Class B properties, as rents remained the same or slightly lower.
Even complexes in hard-hit neighborhoods near the airport or in south-central neighborhoods off Nevada Avenue, Circle Drive and Venetucci Road, with vacancies of almost 20 percent during past quarters, watched renters pour in, filling all but about 13 percent of available apartments.
Carter and Apartment Insights calculated that only the west and north-central Colorado Springs submarkets have not seen improved occupancy.
Despite all this activity, however, rents have remained about the same.
During the second quarter, rents paid by tenants, also know as effective rents, increased by $9, but were not enough to compensate for the prior quarter’s average loss of $12. Overall, rents remain about $6 below a year ago.
Carter said that many landlords have begun to drop concessions — a free month’s rent or extending current lease rates for a few months — in return for signing a lease. Apartment Insights reported the average concession decreased by $8 this quarter to $58 per month, a discount of 8.4 percent from gross rent levels.
Carmen Azzopardi, division manager of Griffis Blessing Management Services Group, said that rents among the company’s 4,500 local property management clients are stable.
“What you see mostly are owners offering fewer concessions like first month’s free rent,” she said.
That’s in contrast to national statistics cited in the Reis report that show effective rents fell 0.9 percent, to $975, compared to the previous quarter and were off 1.9 percent from a year earlier.
Declines were highest in San Jose, San Francisco, Las Vegas, Southern California’s Orange County and Seattle. Those cities had been boosted by technology companies or the housing boom.
Perhaps the Pikes Peak region’s best news came in the form of the total net gain in leased units for the second quarter — improving by 507. That came on the heels of last quarter’s 120-unit gain.
So, after a volatile couple of years for area landlords, the area’s net absorption on a year-over-year basis settled at a respectable 559 units.
Apartment communities on the city’s north side such as the new Alexan at Briargate were big winners. That submarket saw absorption of 157 units. Properties near the airport absorbed 152 units during the same period.
Cary Bruteig, author of the Apartment Insights report, said aside from lower apartment complex investor volume, “all fundamental measures of the apartment market were strong.”
He also cited the city’s 1.5 percent drop in vacancies for the quarter as “significant,” though Carter cautioned that, so far, Colorado Springs has not seen a sustained trend.
“When you look at the last few quarters, we’ve been up, but we’ve also been down,” Carter said. “Last fall we were at a 7.4 percent vacancy rate — a pretty positive sign. Then two quarters later we were back up to 9.6 percent vacancies.”
Both credited the area’s growing military population for the good news.
“These are the initial signs of what we expect to be a significant improvement in the rental market in the quarters and years ahead,” Bruteig said. “New troops at Fort Carson were not expected until mid-summer, but our survey results show that arrivals were already beginning in May. We expect even greater improvement next quarter.”
Bruteig said he also expects a large influx of military households will accompany “limited new (multifamily) construction,” though most of it will consist of about 100 affordable housing units.