This newsletter is a compilation of news and information regarding the rental markets in Boulder and Broomfield counties and the economic status of and outlook for the area. The sources for the data include local and regional news media, association publications and seminars, and information gathered from contacts in the property management and real estate fields. We make every effort to cite all of our sources. Should we miss one please let us know so that we can correct the omission.

Company update

We are finally getting ready to move! Our new offices will be ready sometime in the next two weeks. We will let everyone know when we actually get into the new space.

Metro Denver home prices and the available inventory hit record levels in the month of June. The metro Denver market had 26,533 homes for sale, which was a 23.2 percent increase over June of 2002. Despite the greater availability, low mortgage rates drove housing prices to record levels, with the median price for a single-family home at $230,164. This was 2.3 percent higher than 2002. (Denver Post, June 25, 2003).

In the first half of 2003, the Denver area commercial real estate market increased sales by 23% over last year. According to analysts in the field, the numbers are not indicative of a market turnaround. Instead, investors are purchasing particular targets to assure a steady cash stream from high quality tenants. The types of properties that investors currently desire are single-tenant buildings with long-term leases from credit-worthy tenants, followed by buildings with grocery-anchored retail business, and then buildings with retail of all kinds. Office-warehouse space is next in priority followed by industrial properties. Investors are less interested in multi-tenant office buildings and those combining office and industrial attributes, which have significant vacancies in today?s environment. (Rocky Mountain News, June 21, 2003).

The nation?s unemployment rate reached a nine-year high in May of 6.1%, but the rate of job losses slowed. (Rocky Mountain News, June 7, 2003). In the meantime, Colorado?s jobless rate fell from 5.9% in April to 5.8% in May. Labor department officials report this is an indication that the employment situation may be stabilizing. (Rocky Mountain News, June 21, 2003). Reinforcing that outlook, the number of workers nationwide filing new claims for jobless benefits dropped for three weeks in a row at the end of June. (Boulder Daily Camera, June 27, 2003).

The Colorado economy remains very sluggish. In Denver, the short-term hiring outlook was termed ?horrible? with just 3% of employers predicting they will add staff during the next three months. 27% plan layoffs, 33% expect no change, and 37% simply don?t know what they will do. (Denver Post, June 18, 2003). Although the business sector appears to have stabilized in terms of layoffs, the state is now cutting staff in order to meet budget shortfalls. Over 1,000 state jobs were eliminated over the past year, with over 500 more cuts scheduled over the next few months. (Boulder Daily Camera, July 1, 2003).

The rush to build appears to be slowing, as building permits for homes, condos and apartments fell 14.81% in the first four months of 2003 versus last year. Apartment permitting fell by 28.8%, condos fell by 29.59%, and single-family home activity fell by 7.27% in Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Elbert, and Jefferson counties. (Rocky Mountain News, June 7, 2003).

In mid-June, mortgage rates inched below the 5% mark, spurring on the record flood of refinances in 2003. The rates rose again by the end of the month. (Denver Post, June 19, 2003). Correspondingly, mortgage delinquencies nationwide were lower in the first quarter of 2003 because homeowners were able to refinance their loans at lower interest rates. (Rocky Mountain News, June 21, 2003). That appeared not to be the case in the metro Denver area, as foreclosures for the second quarter increased by 6.2% over 2002. Analysts say that is because borrowers may have cashed the equity out of their homes or moved into expensive houses, and then lost their jobs or were forced to accept pay cuts. (Denver Post, July 1, 2003).

The Commerce department reported at the end of June that consumer spending is inching up with 0.1% increases for each of the last two months. This may be a harbinger of better times ahead, as Americans are feeling more confident about the economy. (Boulder Daily Camera, June 28, 2003).

The Denver area office market continues in a two-year slump, with office vacancy rates high, rental rates decreasing, and few new businesses to expand into the empty spaces. More than one-fifth of the office space is empty or for rent, with a vacancy rate of 21.8%. The average rental rates have dropped to $17.16 per square foot from a high of $20.79 in 2000. (Denver Post, June 27, 2003).

Warehouse vacancy rates are at 7%, up from 5.4% at the end of 2001, prompting landlords to aggressively cut deals to find and keep tenants. Although the asking price is $9 per square foot, 25 to 30% discounts are common. (Denver Post, June 27, 2003).

In Boulder County, higher commercial property taxes are increasing the rent payments for many businesses and raising landlord concerns about retaining tenants in an already depressed economy. Taxing authorities are driving up the mill levies and landlords typically pass on the cost of higher taxes to their tenants. As a result, businesses may be forced to consolidate if they have multiple locations, or move elsewhere. (Boulder County Business Report, June 13-26, 2003).

The residential rental market continues with a high inventory of available rentals, forcing rent into play as the key factor to attract and retain tenants. The number of single family homes that are vacant increased by 1.7% or 14, 323 homes in the Denver area between 2000 and 2003. The vacancy rate for all rental homes was 7.54% in the first quarter of 2003, as compared to 5.63% in the previous quarter. The Denver metro area?s apartment vacancy rate is 13.7%, which is the highest since 1987. The glut of available rentals is a result of a number of factors: low interest rates over the past six months that enticed many renters to buy homes rather than rent; new construction dumped many new apartments on the market over the last few years; and job losses forced renters to move out of the state or in with parents or friends. (Denver Post, June 22, 2003).

Commentary: We are now in the peak rental season. This season still shows a much larger number of rentals available from last year at this time (756 in 7/02 vs. 1,330 in 7/03). The good news is that we are seeing a significant number of people looking for rentals. We are seeing the number of showing up substantially over just a few weeks ago. By pricing the properties correctly we expect to have everything rented in the near future.

The Boulder County Apartment Association continues to work with the city attorney?s office to revise the requirement for property owners to pay 5.5% on security deposits returned to departing tenants. The two sides hope to have recommendations to the city council within the next few months. (Boulder County Business Report, June 13-26, 2003).

What is a competitive rent for your property? There is no one answer for everyone. Each property is unique and must take into account the geography, popularity, amenities, etc. to determine how their property should be priced in this market. Please contact us if you have specific questions or want more information. If you have a specific question about the rental market, a specific property, or property management in general please let us know. We will get that information to you and may include it in future newsletters.

We are actively working to grow the business and to add new properties to our management inventory. If you know someone that would be interested in our services please send them our way. We pay referral fees to anyone referring us business!

That wraps things up for this month. Again, if you do not want to receive these messages please call or email us and we will take you off this mailing list.