Tenants looking at brand new apartment units in downtown Denver have the best chance of winning a break on the rent, while those in older suburban complexes may want to think twice before even asking the landlord for a discount.
“There is a ton of variance in concessions,” said David Pierce, a senior market analyst at the CoStar Group. “In parts of the metro area, you don’t see any concession and in some areas you see lots.”
Rent concessions are a sign that an apartment market is seeing supply outstrip demand. Four years ago, they were fairly rare in metro Denver, and then mostly limited to high-end units downtown. Concessions have become more widespread, but they remain absent or minimal in large swaths of the metro area.
The discount rate on apartment rents across metro Denver this year is running 1.5 percent, not much higher than the U.S. average of 1.4 percent, according to a study released Monday by Apartments.com using CoStar numbers.
Landlords in Denver, on average, are willing to give up to five days of free rent to lure a tenant into a lease, even with the historically high amount of new supply coming onto the market.
But that average masks some big variations. When it comes to apartment buildings built since 2017, the average concession is 4.1 percent of the rent in metro Denver versus 3.2 percent nationally, according to Apartments.com.
That works out to about two weeks of free rent on a year-long lease in Denver. And in those bustling growth pockets like downtown, where developers are looking to fill hundreds of new units, concessions of a month or more of free rent are common, Pierce said.
Landlords of older apartment buildings, especially in the suburbs, aren’t under as much pressure to cut a deal to win tenants. In metro Denver, apartment buildings built before 2010 have an average concession of 0.9 percent of the rent, which works out to a little more than three days of free rent.
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Apartment rents in metro Denver have risen about 40 percent since 2006, among the biggest gains of any metro outside Sacramento. At the same time, developers have focused heavily on luxury units in the urban core, and less so on affordable apartments in the suburbs.
All that has boosted demand for older units that a larger share of households can afford and now appears to be contributing to what is emerging as excess supply of the most expensive units.
“There is some weakness in the ultra-high-end market,” Pierce said. “There is a limit to how many people are willing to pay $4,000 a month for a one-bedroom apartment.”
Salt Lake City and Portland, Ore., have the highest average rent concessions on new units this year, above 5 percent, while Cincinnati had the lowest at 0.4 percent, the study found.
