Apartment vacancies will dry up, some say

Renters had an easier time finding apartments late last year.

But those days are about to end, some experts say. Renters will see the supply of available apartments shrink significantly this year, they say. As that happens, free rent and other discounts offered by landlords will disappear and rents will rise, the experts say.

The vacancy rate for Colorado Springs-area apartments climbed to 10.8 percent during the fourth quarter of 2007, 2.2 percentage points higher than the third quarter, according to a study by University of Denver business professor Gordon Von Stroh. His quarterly reports are conducted for the Apartment Association of Southern Colorado, the Colorado Division of Housing and several other sponsors.

Apartment vacancies typically inch up late in the year, when students, for example, go off to school, Von Stroh said.

Another possible reason for the fourth-quarter increase: Von Stroh’s survey might have been conducted at a time after several thousand Fort Carson soldiers were deployed to Iraq, yet other troops hadn’t returned, said Ken Greene of Apartment Realty Advisors in Denver, one of the report’s sponsors.

Still, as if to signal the market is poised to tighten up, the 10.8 percent vacancy rate was the lowest for any fourth quarter since 2001, according to Von Stroh’s research.

And because no apartment complexes are under construction and because thousands of additional Fort Carson troops are expected to begin arriving this year, Greene predicts the local apartment vacancy rate will fall to about 7 percent by the third quarter of 2008.

That’s when rents will rise and apartment incentives “will be gone all together,” Greene said.

Not everybody believes vacancy rates will drop as far and as fast, however.

State Housing Division Director Kathi Williams said the future of vacancy rates and rents will depend on the economy. If a local slowdown in home building continues, for example, the Springs might lose construction and retail workers who occupy apartments, which will forestall a quick drop in vacancies, she said.

But Greene said he took into account the slowdown in local job growth when making his forecast. Countering the loss of construction and retail workers, he added, might be the possibility that homeowners who have lost houses to foreclosure will rent apartments.

While 10.8 percent of apartments were vacant citywide in the fourth quarter, the rate was nearly 25 percent near Fort Carson in the unincorporated Security-Widefield areas and in the city of Fountain, according to Von Stroh’s report. The vacancy rate was as low as 7.3 percent in the Springs’ far northeast side.

Citywide, monthly rents averaged $703.82 in the fourth quarter, about the same as the third quarter and roughly $12 higher than the fourth quarter of 2006.

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