DENVER-The overall occupancy rate for metro area multifamily rental properties fell to 8.5% in the third quarter, down from 11.1% in the third quarter of 2003. It also improved from the second quarter when it stood at 9.7%.

All seven counties in the metro area showed a decrease in their vacancy rates during the third quarter, according to the Denver Metro Apartment Vacancy & Rent survey authored by Gordon E. Von Stroh, a professor of the Daniels College of Business at the University of Denver. “Denver is chugging around at the bottom, and the question is how long it will stay there,” Steve Rahe, a CB Richard Ellis apartment broker tells “Tell me what the job growth will be and I’ll tell you how long it will take to be back in equilibrium.”

However, Rahe notes that all of the indicators for landlords are moving in the right direction. And he expects more multifamily buildings to sell this year than in last year. The report that shows 26 submarkets in the third quarter showed a decrease in vacancy rates, while 10 showed and increase and one remained the same.

Buildings with nine to 50 units and buildings with more than 350 units showed the highest vacancy rate at 9.1%. Both, however, are down from the second quarter, Von Stroh notes. Historically, larger buildings have had the highest vacancy rates.

When Von Stroh calculates the overall “economic vacancy, which is the physical vacancy plus concessions and other write-offs as a percent of gross potential rent, it is much higher. The overall economic vacancy rate decreased to 24.5% from 25.2% in the second quarter and from 28.5% in the third quarter of 2003. Although the economic vacancy rate is still high, but it is slowly improving, Rahe notes.

Not only did the vacancy rate drop, but also the average rental rate increased to $820.90 for the third quarter, up from $818.14 for the second quarter and $8914.85 for the third quarter 2001. Average rents do not include the cost of rental discounts and concessions, models, bad debts and delinquencies. The median, or middle rent, however, dropped slightly to $779.40 from $779.92 from the second quarter. But it was up from $770.82 in the third quarter of 2003.

The median rent is considered a better indicator of the direction of the market than the average rent. In any case, the monthly rent has been hovering in the same range for the past few years. Landlords react quickly to the market direction, Von Stroh notes. In other words, if they want to improve the occupancy rate, they’ll temporarily lower rates, and if when they hit the occupancy levels they want, they’ll raise rates.

Dan Levin, president of Koelbel Property Management LLC, which owns two luxury apartment communities in the metropolitan area, notes it is still a renter’s market. Indeed, starting rents at are down about $300 per month from where they were at the peak, he notes.

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