Hawks tells GlobeSt.com that the free rent is resulting in more than $1 billion in a drop of value in apartments, and quite possibly twice that amount.

Hawks says he would prefer have seen vacancies rise from 9.3% to a record 15%, than see owners give away free rent.

"On paper, some apartments are not worth what they owe," Hawks tells GlobeSt.com. He adds the situation would be even far worse if not for the fact that so few apartment buildings are put on the market in the Denver area.

"Prices are a little higher than they would be, because there are five buyers for every apartment community for sale," Hawks tells GlobeSt.com. "If not for the buyer seller imbalance, our market would really crater."

The problem with free rent is that buyers don't know what they're getting, he says. The idea is that owners will be able to eliminate the incentive when the market gets better, but that's easier said than done, he notes. Tenants lured to a community offering free rent are unlikely to return when their lease expires, unless they're given another deal, he says.

Also, all it takes is one competitor in the area to offer free rent and the others will be forced to follow suit, he says.

Neither pension fund advisors nor REITs want apartments with free rent, he says.

"Pension fund advisors aren't investors, they're risk managers," Hawks notes. And REITs need to be able to count on steady cash flow quarter to quarter.

One of the most surprising thing about the free rent is that it started with the newest, class-A products on the market, but has trickled down to the class-B and class-C properties.

"If you had asked me, I never would have thought that the free rent would hit the '70s product," Hawks says. "That's why it's making such a big hit on the market. It's across the board."