June 25, 2015

Even with apartments booming, rents are up and vacancies down

Despite all the new residential construction in the region, a new report says Seattle's apartment market is still red hot.

Tom Cain of Apartment Insights Washington said the second quarter vacancy rate — excluding new units still filling up — is 4.05 percent in King and Snohomish counties.

That's down from 4.46 percent last quarter, and the lowest rate for the two counties since 2005 when Cain began tracking vacancies for properties with over 50 units.

When new projects that are still filling up are included the vacancy rate is 6.3 percent, down from 6.59 percent last quarter.

Rents rose $67 in the second quarter to $1,408, or $1.68 per square foot for the two counties. That's an increase of 6.7 percent over the last quarter and 10.4 percent over the last year.

Rents are going up and vacancies are falling even in a time of unprecedented construction.

Cain's report says 10,566 units have opened or are scheduled to finish this year, though some openings have been slightly delayed. Cain forecasts the number of new units built this year in the two counties will be just short of the 1989 record.

But next year that record should fall as 12,168 units are set to open. In 2017, another 9,001 units are expected to open.

Cain's report shows 22,948 units are under construction in the two counties, a 42 percent increase over last year. A total of 58,253 units are in planning, design or under construction.

“We had been expecting the rental market to ease up a bit by now, what with all the new construction. Yet, the market has tightened,” Cain said.

Property owners are offering few incentives — like discounted or free rent — to fill units. Incentives dropped from $15 to $7 a month. Only 17.8 percent of properties in the two counties are offering incentives, down from 26.2 percent last quarter.

The region's most expensive units are in downtown Seattle at $2,226 per month, or $2.72 per square foot. Units in downtown Bellevue average $2,060, or $2.33 per square foot. SeaTac is the only area in the two counties where the average rent is less than $1,000 a month.

This construction boom is fueled by the strong local economy, and new hiring that continues to exceed expectations. About 2.5 percent job growth was projected for 2015. For the year ending in April, job growth was 4.3 percent.

“We know that developers will keep building new units until the demand has been satisfied,” Cain wrote in his report. “That at least is predictable. Predicting when that will happen with any accuracy is not.”