A new study suggests that a growing number of renters are moving from Denver to surrounding suburbs, even though prices in the Mile High City have actually been falling during the COVID-19 pandemic.
"The Suburban Rent Rebound," penned by Apartment List research associate Rob Warnock, notes that the cost of rent in suburbs across the country has edged upward, while it's been heading south in the cities they surround. By the law of supply and demand, this trend indicates that more renters are leaving cities (hence the falling fees) in favor of suburbs (resulting in the rate hikes).
Denver is experiencing the same phenomenon, he says. "Since January, rents in the City of Denver are down 2.6 percent, while rents in nearby suburban areas are, on average, up 1.3 percent," Warnock points out.
"Of the thirteen local suburbs for which we have data," he notes, "eleven of them have seen prices rise."
This graphic illustrates the local trends during 2020:
To what does Warnock attribute the increasing number of renters moving from Denver to the suburbs?
"Suburban areas have grown in popularity this year, thanks to the rapid adoption of remote work, increased value of having more space to live and work, and so many people entering the for-sale market," he replies. "But I think it's important to note that the rental market trends in our data don't necessarily imply a singular migration pattern from Denver to the suburbs. Certainly that flow exists, but another dimension is people from outside the region who are now moving to Denver's suburban areas instead of moving to Denver proper."
In previous years, Warnock continues, "cities like Denver brought in a huge annual influx of out-of-towners looking to take advantage of the strong job market. Now those same movers can access jobs without living as close to the city center. So it's not just a story of people leaving Denver. It's also a story of people not coming to Denver."
According to Warnock, the decline in Denver rent prices is "a reaction to softness in the market. The once-steady demand that has driven up prices over the years is now decentralizing a bit. As the demand permeates into other nearby markets, the two regions start to converge a bit — prices in Denver begin to dip while the prices in local suburbs begin to rise."
Lower traffic volume as a result of more people working from home also makes suburban living more appealing, Warnock believes. "The adoption of remote work has definitely chipped away at the physical bonds that once tied together the housing and labor markets," he explains. "Pre-pandemic, access to good jobs was largely predicated on being physically close to those jobs. This year, that is no longer the case."
Right now, the metro Denver suburbs seeing the highest rent increases are Westminster, up 4 percent since January, followed by Northglenn and Parker (recently named by Money magazine as the second-best place to live in the U.S.) at 3 percent. "These are the ones receiving the highest relative share of new incoming rental demand," Warnock notes.
That's not to say that Denver, or big cities in general, are losing their appeal, Warnock stresses: "We ran an analysis earlier this summer that found that apartment hunters had a similar appetite for density before and after the pandemic hit. In a separate report, we found that the percentage of people looking to leave their region hasn't changed much, but the percentage of people looking to come in from out of town has dropped quite a bit. Which is all to say that migration patterns are nuanced and complex right now."
Warnock expects rent prices in Denver and other big cities to decline "for at least the next several months. Typically the market cools during the winter, even when prices are rising. Today prices are falling, but there's no reason to think the winter holiday season won't have the same effect. More and more companies are pushing back office reopening plans, so the city centers that once commanded high rents will continue seeing a soft market."
That's potentially good news for people looking to stay in Denver. But right now, it appears that quite a few folks are willing to pay more not to do so.
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