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Complex equation



To Larry Guba and dozens of his neighbors, the change was unacceptable.

His community northwest of the intersection of Barnes Road and Powers Boulevard, master-planned since the 1980s but still only partially developed, was expecting a big-box retailer to move in next door. Then, recently, John Olive, a retired developer and owner of the mostly vacant 33.5-acre lot in question, asked city planning to allow apartment buildings on half the land.

For Guba, the change raised concerns about issues like traffic and school crowding, which will be addressed further in the planning process. But one of his biggest concerns will never be considered by city planning.

"Once you put apartments in, and the markets turn," Guba says, "they're going to put whoever they can in there to keep them full."

Overall building is so depressed that the number of new units coming on the market has shrunk from 1,198 in 2005 to 647 so far this year. But with people losing their homes and soldiers coming to town, apartment-building construction is hot right now.

According to Regional Building, in 2005, apartment buildings represented 2.9 percent of all new commercial building permits issued, good for 8 percent of the value. So far in 2011, apartment buildings represent 19.5 percent of all new commercial building permits, 38.8 percent of the value.

According the Colorado Division of Housing, in 2011's second quarter, median rents reached $740 while the vacancy rate stood at 6.4 percent. In the first quarter of 2005, median rent was $653, and the vacancy rate was 12.6 percent.

Kyle Campbell, president of the Housing and Building Association of Colorado Springs, says apartment construction is cyclical, with the last boom having come shortly after the turn of the millennium. It's time, he says, for another, but building apartments means looking carefully at risk. Even with some federal loan options, financing can still be scarce these days.

Dan Robertson, a developer who builds multi-family units and lofts in downtown and traditional urban parts of the city, says strict rules for government financing and the high price of constructing apartments in established areas have made it impossible for him to build, even in the supposedly strong market.

"You can't make the numbers work," he says.

But building in a greenfield is usually more price-friendly, and Olive says he has three builders interested in buying his Barnes Road property and building apartments. Apartments, he says, "are one of the few things in the real estate sector that have a pulse."

It, of course, is hard to predict how the market will change in future years, says Douglas Carter, a local broker specializing in multi-family units. But Carter doesn't think Guba or others who live near new apartment buildings will have much to worry about.

"Almost without exception, the newest apartments are the best-maintained, highest-rent and highest-occupancy in the market," Carter says.

So on the flip side, it's people living near decades-old apartment buildings who might have cause for concern.

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