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DENVER-For seasonal reasons, multifamily rental vacancy often increases in the first quarter from the fourth quarter. But the good news for metro-area property owners is this year, the overall apartment vacancy rate fell to 10.5% from 10.9% in the fourth quarter. A year earlier, vacancy was 13.1%.

However, the most recent Denver Metro Apartment Vacancy & Rent Survey, authored by Gordon E. Von Stroh, a professor at the Daniels College of Business at the University of Denver, delves beneath the physical vacancy rate.

His report also tracks the “economic vacancy,” which is defined as vacancy plus concessions and other write-offs as a percent of gross potential rate.

The economic vacancy rate may be a better indicator of the health of the market than just the number of units that are occupied. In effect, the economic vacancy rate measures the efforts landlords and owners must take to retain and attract new renters in a tough economy with little job growth.

The overall economic vacancy rate in the first quarter increased to 25.7% from 23.1% in the fourth quarter. In the first quarter of 2003, the economic vacancy rate was 21.5%.

Eric Tupler, a lender with the Denver office of LJ Melody & Co., the investment banking arm of CB Richard Ellis, notes that most of the time the physical and the economic vacancy move in the same direction. The first quarter was unusual because landlords are discounting rents so much, he notes.

Von Stroh notes that, despite the increase in the economic vacancy rate, more people are now renting apartments in the metro area than anytime in the past. The report also notes that the average rental rate decreased to $809.14 per month from $814.54 in the fourth quarter of 2003. However, the average monthly rent is up from $799.47 in the first quarter of 2003. Average rents, however, do not include the cost of rental discounts and concessions, models, bad debts and delinquencies.

The median, or middle, monthly rent rose to $777.01 for the first quarter, up from $775.19 in the fourth quarter. The median rent in the first quarter of 2003 was $755.89.

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