Colorado Springs apartment rents fell again in the first quarter and the area’s vacancy rate remained high, more signs that the local multifamily market is overbuilt, a new report suggests.

And, expect those trends of softer rents and higher vacancies to continue unless the pace of absorption, or apartment occupancy, ramps up significantly, one of the report’s authors says. 

Rents in the Springs, Fountain and unincorporated Security-Widefield averaged $1,446 a month in the January-through-March period, a $10 drop from $1,456 in the fourth quarter of 2023 and a $22 decline from $1,468 in the first quarter a year ago, according to a recently released, statewide report by 1876 Analytics, an affiliate of Denver-based Apartment Appraisers & Consultants.

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Average rents now have fallen for four straight quarters on a year-over-year basis and are at their lowest point since $1,419 in the first quarter of 2022, the 1876 Analytics report showed. The report is sponsored by the Colorado Housing and Finance Authority and uses data for the Springs and Front Range markets from online research firm Apartment Insights.

The median rent, or midpoint, also dropped to $1,412 in the first quarter, a $31 decrease from $1,443 in last year’s fourth quarter and a $56 plunge from $1,468 during the same time last year, according to the report.

In the first quarter, 7.2% of Springs-area apartments were vacant, the report showed. That figure was down from 7.5% in the first and fourth quarters of last year, yet was higher than every quarter in the three-year stretch from 2020 to 2022.

The rent and vacancy rate numbers highlight the oversupply of apartments in the Colorado Springs area, Scott Rathbun, a co-author of the 1876 Analytics report, said via email. 

In 2023, nearly 3,060 apartments were completed and opened to renters, while 8,858 apartments were under construction at the end of last year and will be added to the area’s existing supply in the next few years, a Pikes Peak Regional Building Department official said in February.

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Unless absorption increases, apartment rents in Colorado Springs will remain flat or continue to fall slightly in the near future, while the area’s vacancy rate will remain higher than its traditional, stabilized level of 5% to 6%, Rathbun said. 

“Absorption would need to nearly double from its recent historical highs in order (to) start pushing vacancy down in the near future,” Rathbun said. “So, I would say these trends are likely here for at least the next few years.”

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How long those trends actually last will depend on how many apartments are delivered and available to rent annually over the next few years and the rate at which they’re absorbed, he said.

“If more units are delivered, vacancy will continue to go up and rents will continue to go down,” Rathbun said. “If more units are absorbed, then vacancy will decrease and, at some point, likely after vacancy falls below 7%, rent growth will return.”

A combination of factors has led to soaring numbers of apartments being constructed in Colorado Springs over the last several years.

Industry experts have said that demand for apartments was strong among young people who didn’t want to be tied to mortgages. Some older residents and empty nesters also sought to downsize and desired a maintenance-free lifestyle, those experts said.

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Multifamily developers, meanwhile, were attracted by steadily rising rents in Colorado Springs and the potential for healthy returns on their investments, industry experts have said. As a result, several out-of-state real estate companies have launched multiple apartment projects in the Springs.

Developers also liked Colorado Springs’ population gains, strong economy and job growth, while cheaper land costs compared with Denver and other cities made the Springs appealing as a place for new construction, industry experts have said.