Move Over, Austin: Denver Rents Falling at One of the Fastest Rates in the Country

The Denver rental market is experiencing a rapid decline in rents, with the city now ranking among the top in the nation for the fastest rate of decrease. This trend, driven by an oversupply of new apartments, is presenting both challenges and opportunities for landlords and investors in the Mile High City.

Excessive Supply of New Apartments
The primary factor contributing to the rapid decline in Denver rents is the excessive supply of new apartments. In 2024, the regional market added nearly 20,000 new apartments, double the pace of normal construction. This glut of new inventory has outpaced demand, leading to increased competition among landlords and a decline in rents. (Source: Denver Post, Apartment Association of Metro Denver)

Negative Absorption and Increased Vacancies
In the fourth quarter of 2024, absorption turned negative by 4,862 units, causing the vacancy rate to hit 7.5%. This increase in vacancies has forced some landlords to cut rents to attract tenants. (Source: Denver Post, Apartment Association of Metro Denver)

Inflation-Adjusted Rent Decline
When considering the 2% annual rate of inflation, metro Denver tenants are theoretically paying 3.5% less in real dollars for rent. This further emphasizes the significant decline in rents. (Source: Denver Post)

Impact on Landlords and Investors
The increased supply of apartments in Denver has led to a decline in rents and increased competition among landlords. In 2024, the regional market added nearly 20,000 new apartments, double the pace of normal construction, resulting in a 3.6% decline in rents in the fourth quarter. This glut of apartment construction has caused absorption to turn negative, with a vacancy rate of 7.5% by the end of the year, forcing some landlords to cut rents to stay competitive. (Source: Denver Post, 2024)

For landlords and investors, the increased supply of apartments presents both challenges and opportunities. The decline in rents may lead to lower returns on investment in the short term, but it also creates an opportunity for investors to acquire properties at discounted prices. Additionally, the increased competition may encourage landlords to invest in property improvements and amenities to attract tenants, potentially leading to higher occupancy rates and rental income in the long run.

Strategies for Landlords and Investors
To adapt to the changing rental market conditions in Denver and maintain profitability in the face of falling rents, landlords and investors can employ several strategies:

1. Diversify property portfolio: Expand your investment portfolio to include different types of properties, such as single-family homes, condos, or small multifamily units. This diversification can help mitigate the impact of falling rents in one segment of the market. (Source: Denver Real Estate Investing Podcast)
2. Medium-term rental conversions: Consider converting some of your rental properties into medium-term rentals, which can provide higher rental income and better occupancy rates. This strategy can be particularly useful in areas with strong demand for temporary housing, such as near universities or in tourist destinations. (Source: Denver Real Estate Investing Podcast)
3. Offer concessions and incentives: To attract tenants in a competitive market, landlords can offer concessions and incentives, such as free rent for the first month or reduced security deposits. This can help fill vacancies more quickly and maintain profitability. (Source: Colorado Springs & Pueblo December 2024 Real Estate Market Updates)
4. Maintain and upgrade properties: Keep your rental properties in good condition and make necessary upgrades to attract tenants and command higher rents. Regular maintenance and improvements can help differentiate your properties from competitors and maintain profitability. (Source: Denver December 2024 Real Estate Market Reports)
5. Target specific market segments: Focus on market segments with strong demand and limited supply, such as affordable housing or properties near popular amenities. By targeting these segments, landlords can maintain higher occupancy rates and rental income. (Source: Denver 2024 Q4 Residential Real Estate Trends)
6. Monitor market trends: Stay informed about local market trends and adjust your rental strategies accordingly. For example, if rents in a particular neighborhood are falling, consider adjusting your rental price or offering concessions to attract tenants. (Source: Denver 2024 Q4 Residential Real Estate Trends)
7. Portfolio liquidation strategies: If the rental market conditions become too challenging, consider liquidating some of your properties to minimize losses. However, it's essential to develop a strategic plan for portfolio liquidation, taking into account the segmented market and current demand. (Source: Denver Real Estate Investing Podcast)

Conclusion
The Denver rental market is experiencing a rapid decline in rents, driven by an oversupply of new apartments and increased competition among landlords. While this trend presents challenges for landlords and investors, it also offers opportunities for those who can adapt their strategies to the changing market conditions. By diversifying their property portfolios, converting properties to medium-term rentals, offering concessions, maintaining and upgrading properties, targeting specific market segments, monitoring market trends, and employing strategic portfolio liquidation, landlords and investors can maintain profitability in the face of falling rents. As Denver continues to grow and evolve, understanding and adapting to these market dynamics will be crucial for success in the Mile High City's rental market.