The report, which tracks more than 30 municipalities from Boulder to Elbert counties, shows only 26 permits were issued in July 2003, all of them in Boulder. By contrast, in July of 2004, there were 391 permits issued, far more than the average number of permits issued per month. And despite the surge in activity, developers in only three cities pulled permits in July. The most permits were pulled in Denver with 275, followed by Lakewood with 66 and Broomfield with 50.
Cary Bruteig, principal of Apartment Appraisers & Consultants, is surprised developers are pulling so many permits. He says he expectsthe lion's share of them are either tax credit deals for low- and moderate-income renters, or they're urban infill developments or are near a light rail stop. Developers need a good story to be able to convince lenders to finance in this market, which is suffering from a lack of demand. Also, because of the low interest rates and no-down payment programs available, in recent years many renters have left apartments to buy homes.
Bruteig says he was anticipating about 1,500 permits to be pulled this year. In other words, with still five months to go in the statistics, that number already has been topped. On the other hand, if this trend continues, about 3,000 permits will be pulled this year. Because permits represent future development, the majority of the permits issued this year represent units that will open in 2005 and possibly 2006. The market absorbs about 4,000 units each year, Bruteig tells GlobeSt.com.
The market can absorb the more-than-expected permit activity, Bruteig adds. But by adding to the supply, it will delay the recovery in the apartment market, he notes.
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