WESTERN SNAPSHOT, JULY 2010
Seattle Multifamily Market
Rental rates have stopped declining, and in the last 45 days the Seattle area has seen an unexpected demand for new multifamily dwellings. By spring 2011, expect a healthy increase in rents and property values for several reasons: a recent prediction of job growth through 2015 and the rapid absorption of new inventory.
Recent research by Dupre + Scott Apartment Advisors indicates that current vacancy rates remain relatively unchanged at 6.7 percent in Washington State’s Tri-County area (King, Snohomish and Pierce). Additional findings: The current average apartment rent is $955, down $46 from the same time last year. In King County, the vacancy rate is lower, at 6 percent, with an average rental rate of $1,017. One year ago, that rate was $48 higher. A longer, broader trend shows rents have dropped by 20 to 25 percent since the last peak in late 2008, much of that in the form of landlord concessions.
More inventory came on line and is being quickly absorbed. A total of 3,997 new apartment units were added to the Tri-County market, and the bulk of those (3,646) were in King County. Some of the largest, new multifamily developments include Fairfield Residential’s Reserve (440 units) in Renton; Avalon Communities’s Avalon Bellevue Towers (397 units) in west Bellevue; and Simpson Housing’s Metro 112 (299 units), also in west Bellevue.
Dupre + Scott research also found that $150 million in apartment sales (5 units or more) have been sold year-to-date in the Tri-County market, down by $50 million when compared to the same period last year. Using the same timeframe, the average sales price per apartment (5 units or more) is $95,516, down from $117,181. Look for a reversal in this trend by 2011 based on the 5-year job growth prediction and less new inventory in the pipeline. In King county alone three major developments (150 + units) changed hands, totaling $87.5 million. Those include the 248-unit Montebello Apartments bought by Pacific Property Company; 312-unit The Cove bought by Weidner Investment Services; and the 156-unit Rianna Apartments purchased by Equity Residential Properties.
Conway Pedersen Economics recently updated their unemployment forecast for the Seattle area. Between 2010 and 2015, 240,000 new jobs are expected, signifying lower multifamily vacancy in the metro. Additionally, only 1,236 new rental units will come on line in 2011. Both factors should help drive rental rates higher.
Pete Shelton is a senior director and Kim Grant is a broker with Cushman & Wakefield / Commerce Real Estate Solutions in Bellevue, Washington.
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