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March 25, 2014
The apartment vacancy rate is near an all-time low and a record number of units are scheduled to open next year, according to a report by Dupre + Scott Apartment Advisors.
Excluding properties that just opened throughout the region, the vacancy rate is down from 4 percent last fall to 3.6 percent.
Rents are up 3.3 percent over the last six months and 7.5 percent in the last year. Property owners told Dupre + Scott they expect to raise rents another 2.9 percent by September.
Nearly 4,000 units opened in the last six months and another 7,000 are scheduled to open in the next six months. Developers plan to open about 10,000 units this year and 14,500 units next year, which would set a record for one calendar year, Dupre + Scott said.
“The vacancy rate has only been this low once before since 1980. So if this is the calm before the storm, it is an extremely good way to start,” said Patty Dupre, principal at Dupre + Scott.
Developers are planning another 14,000 units that would open in 2016 and 2017, but that number could go up or down in the next year or so, Dupre said.
The total vacancy, which includes buildings that just opened and are still leasing up, is 5 percent, up from 4.7 percent six months ago. Not to worry, Dupre + Scott say, the 9,400 new units pushing up total vacancy rates are already 64 percent occupied.
While Dupre + Scott had generally positive things to say about the apartment market, they warned that big rent increases in hot neighborhoods have been juiced by new construction. New buildings tend to be about 40 percent more expensive than older units, Dupre + Scott said.
In South Lake union, rents for one-bedroom units jumped 18 percent in the past two years. But developers added more than 2,000 units in the same period, increasing apartment stock in the neighborhood by almost 33 percent. Take out those new units, and one-bedroom rents rose about 10 percent in the past two years.
“We're just beginning to see the rent distortion that new construction will create in a number of neighborhoods like Ballard, West Seattle, Capitol Hill, downtown Bellevue, and others. So beware the skew of the new,” Dupre said.
For more information on the report, visit: www.duprescott.com