Denver’s Rental Market Update (2026): From Oversupply to Stabilization
Updated: January 2026 — based on actual delivery and absorption trends post-2024 + construction pipeline data from CBRE, MMG Real Estate Advisors, NMHC/Yardi Matrix, and local market sources.
Denver’s rental market is now in the early stages of the shift we predicted in April 2025 — where a significant slowdown in construction starts would eventually begin to rebalance a previously oversupplied market. At the time, we projected a ~42% drop in new multifamily starts and analyzed how that contraction might play out through 2028.
Fast forward to today: that decline has largely come to fruition, the pipeline has thinned, vacancy peaked, and rental fundamentals are showing early signs of normalizing — with important nuance in submarkets, property classes, and asset tiers.
Here’s a data-driven look at where the Denver rental market stands — and where it’s likely headed.
1. Construction Pipeline: Shrinking as Forecasted
Developers delivered nearly 10,000 new units in 2025 as of mid-year, sharply down from the previous year’s 23,000+ deliveries. This represents a meaningful contraction in supply growth consistent with a large drop in starts.
The multifamily development pipeline recently fell to a five-year low, reflecting the significant pullback in starts and fewer projects moving forward.
CBRE’s 2026 outlook confirms that deliveries will remain elevated into 2026 but drop sharply in 2027, which aligns with the delayed but inevitable impact of fewer starts in 2024–2025.
Impact: Supply additions are now declining — setting the stage for eventual supply-demand rebalancing.
2. Vacancy: Peak Has Arrived (or Close To It)
The Metro Denver vacancy rate climbed to the highest level in approximately 16 years, reaching roughly 7.6% by year-end 2025 and over 34,000 units empty — a clear oversupply signal.
Other reports noted vacancy in some segments reaching 11.7% as deliveries outpaced net absorption, particularly in newer product.
Early 2026 commentary from brokers characterizes the market as “overbuilt,” especially in core urban areas, though demand is beginning to catch up as the pipeline slows.
Implication: Vacancy peaked as expected as massive inventory temporarily outpaced demand — but now faces downward pressure as completions decelerate.
3. Rent Growth: Soft to Stabilizing
Average rents declined in 2025, with some surveys reporting rent drops of around 3%, the largest drop in years.
Third-quarter 2025 rent data showed year-over-year declines and continued softness in lease-up velocity.
However, investor and property-management forecasts anticipate rent stabilization through 2026 and modest growth returning later in 2026 into 2027 as inventory growth eases.
Zooming Out: Rent trends that started falling due to heavy supply pressure appear to be bottoming out, with early signals of gradual recovery once completions pull back.
4. Absorption Trends: Demand Catching Up
Some mid-2025 reports recorded strong absorption in specific quarters, even as supply rose — indicating demand is present but timing mismatches delayed equilibrium.
Property-management forecasts and MMG analysis expect ongoing absorption to outstrip new deliveries by late 2025 and into 2026, driving stabilization of vacancy and eventual rent pressure relief.
What This Means: Absorption lags construction, so the market will likely require 12–18 months of slower deliveries to materially tighten fundamentals.
5. Class & Submarket Nuances
Newer, Class A units bore much of the vacancy expansion due to their timing and volume coming online. More price-sensitive renters have gravitated toward other submarkets or product types.
Suburban and mid-tier assets may see earlier stabilization in occupancy and rents relative to oversupplied urban cores.
Class B/C properties may outperform in occupancy as renters trade down or seek more affordable options in a soft market.
Synthesis: What’s Actually Happening vs. April 2025 Expectations
Forecast Lens (Apr 2025)Actual 2025–2026 TrendConstruction starts sharp decline✓ Nearly realized; pipeline at multi-year lowDeliveries tapering by 2026–27✓ Deliveries high into 2026, then drop expectedVacancy should peak then fall✓ Vacancy peaked; starting to balanceRents to rebound by 2026–28≈ Modest stabilization now, slow growth laterTenant → balanced/landlord market shift≈ Early signs of shift underway
In other words: the thesis of your April 2025 analysis is playing out — but with real-world lags on vacancy and rent growth due to sheer scale of deliveries from the 2023–2024 pipeline.
Bottom Line for Investors & Operators (2026)
Supply growth is slowing fast — pipeline contraction is real, and starts are down meaningfully.
Vacancy has peaked in many segments and will likely trend down as supply eases.
Rental rates should begin stabilizing in 2026, with modest growth returning as supply/demand balances.
Strong fundamentals remain — persistent in-migration and limited homeownership affordability support renters long term.
Outlook (2026–2028)
Looking ahead, a more balanced Denver rental market is emerging:
2026: Stabilization of vacancy; rents flat or modestly positive.
Late 2026 – 2027: Rental rate growth picks up modestly as deliveries decrease.
2027–2028: Potential landlord-favorable dynamics return in many submarkets as excess supply is absorbed and starts remain low.
The market is transitioning from an oversupplied, renter-favored environment toward equilibrium and eventual tightening— just as your original blog predicted.