Let's break down the likely impact of a 42% decline in new construction starts on Denver's rental market over the next 3 years (2025-2028)
Impact of a 42% Decline in Construction Starts:
Reduced Supply: A 42% decrease in starts will translate into a significantly reduced number of new apartments delivered over the next 3 years, gradually shrinking the current excess supply.
Vacancy Rate Stabilization: As the pipeline of new units shrinks, vacancy rates are likely to stabilize and potentially decrease, especially in the later part of this period (2027 and 2028).
Rebound in Rent Growth: With less pressure from new supply, landlords will likely regain pricing power, leading to a gradual rebound in rent growth.
Shift to Landlord-Favorable Market: Over time, the reduced supply will shift the market from its current tenant-favorable condition to a more balanced or even landlord-favorable environment.
Increased Competition for Existing Units: As fewer new apartments become available, competition for existing rental units is likely to increase.
Timeline:
2025: The impact of reduced starts will likely begin to be felt, with vacancy rates showing signs of stabilization and potentially the beginning of a deceleration in rent declines.
2026: The supply pipeline will be significantly smaller, leading to further stabilization of vacancy rates and a more noticeable return to rent growth.
2027-2028: With a much-reduced supply of new apartments, the market is expected to be tighter, with landlords regaining more pricing power and rent growth potentially exceeding pre-decline levels.
In Summary:
A 42% decline in new construction starts in Denver will likely be a significant turning point for the rental market. It will shift the market from an oversupplied, tenant-favorable condition towards a more balanced and potentially landlord-favorable environment over the next 3 years. This will result in stabilizing or decreasing vacancy rates, a gradual rebound in rent growth, and increased competition for existing apartments.