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September 15, 2015
Just like Seattle's record-setting summer heat, the local apartment market also sizzled in the third quarter, with low vacancies and rising rents.
Tom Cain of Apartment Insights Washington said the third quarter vacancy rate — excluding new units still filling up — is 4.07 percent in King and Snohomish counties. That's up slightly from last quarter's 4.05 percent, which was the lowest rate since Cain began tracking properties with over 50 units. The vacancy rate was 4.3 percent at this time last year.
When you include new units still filling up, the vacancy rate jumps to 6.67 percent. That's up from last quarter's 6.3 percent.
Cain says 3,449 new units opened in the two counties this quarter, which explains the slight uptick in the rate when new properties are included.
Edmonds and Monroe/Marysville are the tightest markets in the two counties; both are below 3 percent.
East Bellevue has the highest vacancy at 7.39 percent, and Ballard is second at 5.89 percent. If you include new properties, Ballard's vacancy jumps to 22.5 percent.
Cain said he expected 2015 to be a record-breaker for apartment construction in the two counties. Cain said 10,642 apartments were scheduled to open this year, which would top the record: 10,056 units in 1989. But Cain says some projects set to open this year are taking longer to finish, so 2015 may not outpace 1989.
But the record could fall next year. Cain says he is tracking 13,018 units scheduled for a 2016 opening. For 2017, the number is 11,124 units.
In 1989, only 5 percent of the new apartments were in Seattle. Cain said 46 percent of the new units built this year will be in Seattle.
There are 63,942 units in various stages of development in the two counties, including 22,655 units under construction.
Rents this quarter increased 3.1 percent to $1,451, or $1.74 per square foot, across the two counties. Rents have increased 10.1 percent over the past 12 months, Cain reports.
Downtown Seattle is the most expensive market with an average rent of $2,263 per month, or $2.79 per square foot. Downtown Bellevue comes in second at $2,130, or $2.42 per square foot.
Seattle's Belltown neighborhood and Kent saw the biggest increases in rent this quarter at around 5 percent.
By next quarter, Cain reports, there may not be a single area in the two counties with average rents below $1,000. SeaTac is the lone spot with rents below $1,000, but just barely. Average rent there is $998.
Incentives, like discounted or free rent, increased $1 over the last quarter to an average of $8 per month. The percentage of properties offering incentives dropped from 17.8 percent to 16 percent this quarter.
As the apartment market heated up post-recession, many prognosticators expected the momentum would slow. But so far that hasn't happened, primarily because of sustained job growth.
Rents have been steadily climbing, and the vacancy rate hasn't been above 5 percent since the first quarter of 2012, three-and-a-half years ago, Cain said. Typically, Cain provides some predictions in his reports, but this time he said he's just along for the ride.
“The market has been dynamic for quite some time,” he wrote. “At this juncture, we've chosen not to speculate on the market. It's much more fun to watch.”