Colorado Springs apartment rents soared to an average of nearly $1,430 a month in the second quarter — another record high and the first time local rents have blown past the $1,400-a-month mark, an industry report shows.
With the latest increase, average apartment rents have spiked by nearly $164 a month, or almost 13%, since the start of 2021, according to a report by the University of Denver's Daniels College of Business and Colorado Economic and Management Associates, a Denver-area firm.
"The last two quarters have been big jumps," said Ron Throupe, an associate professor of real estate at the University of Denver and the report's author. "Together, you're looking at a very significant change."
The second-quarter report, sponsored by the Colorado Division of Housing, surveyed local apartment owners and landlords whose properties totaled nearly 23,000 units in the Colorado Springs area. It showed:
• The average monthly rent jumped to $1,429.58 in the second quarter in the Colorado Springs area, up $95.89 over the first quarter when rents averaged $1,333.69. Since the start of the year, rents have climbed by $163.66 and are $183.11 higher than in the second quarter of 2020.
• Rents were most expensive on the city's northwest side, where they averaged $1,575.99 a month. Southeast side rents were the lowest, averaging $1,242.84.
• Apartments built since 2010 averaged $1,728.08 a month and were the priciest in the area; newer units typically come with pools, fitness centers, dog runs and other amenities that drive up their rental costs. Apartments built during the 1970s were the least expensive, averaging $1,088.92 a month.
A surging demand has been one of the biggest reasons for the jump in rents, Throupe said.
A shortage of single-family homes available on the resale side of the market has led to bidding wars among buyers. But that same lack of homes has forced many existing renters to stay put, while high school and college graduates and other new renters are looking for apartments, too, Throupe said.
As a result, the vacancy rate for Springs-area apartments dipped to 4.4% in the second quarter, the lowest since 4% in the third quarter of 2016, according to his report. The vacancy rate was 5% in the first quarter of this year and 4.5% a year ago.
"There's demand to stay in units and there's new demand to move into a unit," Throupe said. "Those together are the total demand.
"You have a situation where maybe people want to move out, but they just don't have the means or can't find a property to move into," he said. "So they end up staying. And then there's new demand on top of it, which in total has created a limited supply on the apartment side, too."
The inventory of apartments available to rent also is a problem, he said. While several local apartment projects are under construction, only 94 units were added to the overall supply and became available to rent in the second quarter, according to the report.
"The supply hasn't expanded that quickly, either," Throupe said. "You have people in a bind. Whether they want to move out or not, there's not a lot of opportunity to move out for single-family (home) ... so they're staying in apartments. There's always some new demand, as you get, let's face it, kids graduate. There's always going to be some new demand that's hitting the market."
Landlords and property owners also are passing on higher costs to operate and maintain their apartments, he said.
"They've got to cover their costs," Throupe said. "At some point, they've got to pass them on. They've been holding off during COVID. ... Sooner or later they've got to pass this stuff on and that's starting to happen."