Apartment Market Soars, but Shortages Seen
Apartment building permits soared in the Denver area in the first half of the year, shows a report released today. The report by the Home Builders Association of Metro Denver showed that 520 building permits were issued in the Denver-area in the first six months of the year, 69.4 percent more than the 307 from January through June in 2010. And almost all of the permits – 507 of them, or 97.5 percent of them – were in Denver, albeit in the suburbs where there is vacant land.
Permits for single-family attached – condos and town homes – meanwhile, were down 22.4 percent in the first half of the year compared with the first six months of 2010, with 323 permits pulled compared with 416 last year. Single-family detached home permits, by contrast, were basically flat, down only 1.9 percent to 1,726 from 1,759.
The HBA report covers the counties of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Elbert, and Jefferson, as well as all of the individual communities in each county. Permits reflect future building, not actual construction.
Of the 520 building permits, 50 of them were pulled in June, all of them in Denver. That is a whopping 614.3 percent increase over the 7 pulled in June 2010, but the numbers are small. Even the 520 permits pulled in the first six months is an extremely low number by historic standards, said Jeff Hawks, a principal of Apartment Realty Advisors.
Apartment Shortage Coming
“It may sound like it is up a lot, but if you annualize it, we really are only about 25 percent of the annualized number of permits we have had over the past 20 years,” Hawks said. Apartment Realty Advisors has projected 8,000 new units will be built in the Denver area during the past two years, with the majority of those coming on line in the second and third year.
“If all that construction happens, and all 8,000 units are built, three years from now our vacancy rate will be 1 percentage point lower than it is today,” he said. “It will be below 4 percent.” The Colorado Division of Housing recently reported that the Denver-area apartment vacancy rate is at a 10-year low of 4.8 percent. There is absolutely no chance of over-building in the Denver area, Hawks said.
“To overbuild, we would need to see more than twice what is on the drawing board built,” he said. “That is physically impossible.”
Historically, the Denver market needs to add about 4,500 units each year just to keep up.
Filed Under: Apartment Market
