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DENVER-Metro-area apartment vacancies, already at a 16-year high at 13.1%, will likely increase even more during the second half of the year, according to a report by the Genesis Group, a local firm that tracks all types of housing along the Front Range. Genesis says the large number of apartments still under construction will drive up vacancy rates.Also, apartment developers will likely continue to offer rental incentives to keep residents. “This will be particularly effective if interest rates begin to increase and make home ownership less affordable,” Genesis reports.

In addition, as apartment project values are eroded by high vacancy rates and lower rental rates, condo conversions will become an increasingly attractive alternative for apartment owners, the Genesis report goes on to say. That will be especially true for apartments built within the last few years, as many of those were built with the idea of conversion as an exit strategy, according to Genesis.

The Genesis report says that will provide stiff competition to the lower-end of the for-sale housing market, “And if interest rates remain low, apartment owners will have an increasing financial incentive to convert to condominiums and compete with the attached for-sale market.”

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