The current Colorado Springs apartment market is healthy — maybe the healthiest it has ever been.
That’s the conclusion by area experts after reviewing the most recent vacancy and rent survey results from the Colorado Division of Housing. Vacancy, at 5.6 percent, is the lowest locally in more than a decade. But it’s not so low that renters are crunched, said Ryan McMaken, an economist with the division of housing.
“Healthy” should not be confused with normal, said Kevin McKenna, a Colorado Springs-based broker with the Denver office of Apartment Realty Advisors.
“There’s no such thing as a typical apartment market in Colorado Springs,” McKenna said. “It’s always kind of all over the place.”
Vacancy rates for most of the past decade had been well above 10 percent thanks to overbuilding between 1999 and 2003.
A vacancy rate of 5.6 percent allows apartment complex owners to raise rents and keep up with expenses, McMaken said. But it’s not enough to make rents surge uncontrollably or to limit options for renters.
“This is a healthy market,” McKenna said. “We’re stabilizing. We’re not overbuilding.”
An additional 260 units came on the market in the first quarter of 2013: Nor’wood Development Group’s North Pointe Apartments near the intersection of Rockrimmon Boulevard and Delmonico Street. Nor’wood is building another 315 units at its First & Main Town Center on Powers Boulevard and opened a 240-unit complex in Fountain last year.
Another developer is building the 177-unit Vistas at Jackson Creek in Monument. And the Peaks at Woodmen, a 230-unit complex, opened last summer at the intersection of Woodmen Road and Union Boulevard.
Multiple other projects were planned this year, but McKenna said they have stalled. He knows of a developer who had property under contract on the West Side but backed off for lack of financing. The same issue caused another developer with plans to build apartments near University Village Colorado to hold off, McKenna said.
Developers were counting on government-backed financing from Housing and Urban Development. HUD was offering long-term, fixed-rate financing to apartment developers.
“But they seem to have put a hold in Colorado Springs,” McKenna said.
Developers are more likely to hold out for that financing than they are to seek alternative lenders.
Ron Throupe, professor of real estate and construction management at the University of Denver and the vacancy and rent report author, says he has heard that lenders are policing themselves against overbuilding — something that hurt banks when developers ended up with high vacancy rates after the last building cycle a decade ago.
“That makes sense,” McKenna said. “The lenders are supposed to be the rational ones.”
The addition of about 3,700 jobs in the past two years can account for some growth in the apartment market.
“When unemployment peaked around 10 percent in 2011 it really hobbled the multi-family market,” McMaken said. “Especially there in Colorado Springs where it was really easy for young people, if they couldn’t find a job down there, to just move to Denver.”
Better employment means more household creation. As people move to town for jobs or find work and move out of housing they shared with family or friends, apartment demand picks up, McMaken said.
“We also have a pretty small inventory of single-family homes on the market right now,” Throupe said. “And new construction is picking up, but it’s not enough. Apartment vacancy is low basically because we don’t have another option right now.”
In Denver, vacancy rates below 5 percent have sent rents soaring and spawned new construction.
Colorado Springs seems to be holding steady and most said they expected the trend to continue.
One factor could upset the current balance, said Laura Nelson, executive director of the Apartment Association of Southern Colorado. She said her members reported that Fort Carson could be moving some troops out, which would lead to increased vacancy.
VACANCY: 5.6 percent
o Last Quarter: 7.1 percent
o This quarter 2012: 6.4 percent
o This quarter 2011: 5.8 percent
o Median rent: $ 760.07
Last quarter: $ 766.45
This quarter 2012: $ 728.02
This quarter 2011: $ 714.14
o Average rent: $ 787.74
Last quarter: $ 790.95
This quarter 2012: $ 745.77
This quarter 2011: $ 737.00
o Average for units by age
2000-2004: $ 999.50
1990-1999 $ 986.14
1980-1989 $ 739.59
1970-1979 $ 635.89
1960-1969 $ 665.57