Region’s apartment vacancy rates creep up

“For Rent” signs are popping up all over Greeley and Fort Collins, and in some cases staying up longer than in recent history. So far, however, no one has hit the panic button as vacancy rates, once 1 percent to 2 percent or less, rise to the 4 percent to 7 percent range.And as developers erect more rental units, some wonder how it will affect the softening rental market in the long run.
In Greeley, there is a discrepancy on what the actual vacancy rate is. A report released in February by the Colorado Division of Housing, titled “Multi-Family Housing Vacancy and Rental Survey,” shows the vacancy rate at 7.6 percent. The city of Greeley, however, said its latest figures indicate the rate at 4.6 percent. The Weld County Apartment Association said a more realistic figure is 6 percent.
Members of the Weld County Apartment Association, representing 2,294 units, concede they are seeing big changes, said Terrie Baney, executive secretary of the organization.
“There are lots of signs going up, rentals are setting empty for longer periods of time, and the market is becoming saturated,” Baney said.
Baney said landlords haven’t had to reduce the rents they charge, but that may begin to happen as time goes on.
“People are having to sit on rentals for a month at a time,” Baney said. “If they lower rents, they won’t sit on it as long.”
Average rents in Greeley are $327 for an efficiency; $440 for a one bedroom; $495 for a two bedroom, one bath; $604 for a two bedroom, two bath; and $628 for a three-bedroom.
In 1996, the city issued 21 building permits for multifamily housing, representing 103 units. Baney, however, is philosophical about the future.
“Individually, we don’t want to see competition coming in, but I can’t see what 200 units will contribute other than more vacancies,” Baney said.
Baney is referring to Creekstone, which will add about 200 more apartments to Greeley’s rental market. The complex, recently approved by Greeley’s city council, is still in the building-review stages. However, it is known that it will offer a quarter of its units to those meeting low-income guidelines.
Creekstone, located immediately south of Gateway Place Apartments, a 200-plus-unit complex off 35th Avenue and 24th Street, has Gateway’s manager, Jena Johnson, wondering how it will affect her vacancy rate.
“It takes everything I’ve got to keep the place full,” she said. Realtors target renters with the question “Why rent when you can buy?” and Johnson said she sees many taking them up on it. She said that if developers continue to build apartments, they should do more three-bedroom units, which continue to be in short supply.
Approval of Creekstone was somewhat controversial, mostly because of its size and proximity to Gateway, but city planner Greg Flebbe said that as long as the project, which received conceptual approval earlier, met zoning and building-site requirements, it was a go.
What might have a greater impact on Greeley’s landlords, Flebbe added, is the number of assisted-living units coming on line – 300 to 400 in the next year. Older residents will vacate not only homes but also regular apartments to move into these retirement units, which offer personal and medical care as needed.
Fort Collins, too, is experiencing a softening rental market. Its vacancy rate is about 4 percent, according to the Colorado Apartment Association’s Fort Collins chapter.
Several new rental units coming on line have contributed to the higher rate. These include Jefferson Commons, with 660 bedrooms geared toward Colorado State University students, Rose Tree’s 166 units, and Scenic Views’ 192 units. Also, said Chris Wells, broker associate with Veldman Morgan Commercial, there are at least another 1,000 units under contract, many using tax credits for subsidized housing.
And subsidized housing, such as 150-unit Bull Run, planned for Mulberry Street and Lemay Avenue near the new Super Wal-Mart, he continued, weakens the balance of the market because they fill up first. This is offset, however, by Fort Collins’ annual growth rate of 2 percent to 3 percent.
One tactic that Wells suspects landlords will take to stabilize the market is to not increase rents as rapidly as they have in recent years.
“People who are going to raise rents are the ones who will suffer,” Wells said.
Average rents in Fort Collins are $450 to $500 for one-bedroom units and $250 to $300 per bedroom for two-to-three bedroom units. Fort Collins also is home to high-end complexes that charge considerably more – $850 to $1,200 per unit.
“These people can afford a house, but they don’t want the hassle. It’s a psychological thing,” Wells said. And what surprises him most is that these complexes are full or almost full.
Carrie Gillis, who serves on the board of directors for the Colorado Apartment Association Fort Collins Chapter, said members have noted how the soft market seems to be turning around.
“One individual commented how not only have leases picked up, but that the number of phone calls and drive-by traffic have increased,” Gillis said.
Though some in Fort Collins were forecasting vacancy rates in the double digits by this fall, Gillis said she doesn’t see that happening now.
“Three months ago I would have said, yes, there’s a strong possibility. I don’t foresee it now,” she said. “A 4 to 6 percent rate is livable. We were spoiled with 2 percent or less.”