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DENVER-The metro area apartment vacancy rate decreased to 8% in the second quarter, the lowest it has been since the third quarter of 2001, according to the recently released Denver Metro Apartment Vacancy & Rent Survey. The detailed report, which weighs in at two pounds, is researched and authored by Gordon E. Von Stroh, a professor at the Daniels College of Business at the University of Denver.

The vacancy rate is down from 9.3% in the first quarter and 9.7% in the second quarter of 2004. The last time the vacancy rate was lower was in the third quarter of 2001, when it stood at 6.8%. All of the counties showed a decrease in their vacancy rate in the second quarter. Of the 37 submarkets, 30 showed a decrease while seven showed an increase. Tom Luinstra, president of Apartment Finders International in Denver, says he expects that for seasonal and other reasons, he expects the vacancy rate to dip even lower in the third quarter.

But what Von Stroh defines as the “economic vacancy,” which is the physical vacancy rate plus concessions as other write-offs as a percentage of gross potential rent, remains high, although it is improving. The economic vacancy rate dropped slightly in the second quarter to 23.5% from 24.3% for the first quarter and from 25.2% in the second quarter of 2004.

The average monthly rental rate decreased to $826.49 in the second quarter from $833.51 in the fist quarter. But it is up from a year earlier, when it stood at $818.14. And the median, or middle, rent decreased to $785.72 in the second quarter from $792.97 in the first quarter. However, the median rent rose from a year earlier, when it stood at $779.92.

Only 1,075 new units were added to the multi-family rental inventory. Of the 279,092 apartment units in the seven-county area, there was a net positive absorption of 4,537 units. For the second quarter, the monthly turnover rate was 5.15%, compared with 5.8% a year earlier.

Given the limited number of new additions to the inventory during the past 12 quarters, the improvement in the overall metro-area economy and a slight increase in interest rates, Von Stroh says the vacancy rate drop was expected. The apartment market, Luinstra notes, improves when mortgage rates rise, because fewer people can afford to buy homes. Additionally, if the torrid pace of home foreclosures continues in the Denver area, that also will help the apartment market, Luinstra says.

“For units that have rental levels above the average rental rate of $826.49, the vacancy rate is still relatively high,” states the report. “The overall average rent for the last four years has been relatively stable.”

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