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June 28, 2018

Multifamily: Seattle's hot market pushes south

  • Price premiums for multifamily properties are becoming the norm in Tacoma.
    • By AUSTIN KELLEY
    Kidder Mathews

    mug
    Kelley

    Multifamily in Tacoma has seen rapid growth and development since 2012, with few signs of slowing.

    Like many other communities that are one or two bubbles out of Seattle’s white-hot rental market, Tacoma is seeing a huge benefit from the tremendous job growth up north. Rents have gone up and continue to go up from King County to Pierce, and even greatly affecting Thurston County.

    With rents on the rise, developers have followed with new construction across Tacoma. In the last few years, mid-rise developments have skyrocketed in Tacoma’s Stadium district. Since 2015, over 2,200 units have been completed or are under construction — including a 500-plus-unit building set to anchor downtown Tacoma when it opens in February 2019.

    The influx of high paying jobs in the Seattle tech industry has greatly impacted the surrounding sub-markets, with Tacoma leading the pack.

    In what’s most certainly a seller’s market, Tacoma has seen a low inventory of properties for sale, coupled with huge interest. Price premiums for multifamily are becoming the norm. While most properties are trading between a 5 and 6 percent cap, it’s not uncommon to see multifamily dip below 5 percent, especially in the Stadium District — rivaling some Seattle prices.

    In this market sellers should expect multiple offers, creating a healthy bidding war at or above asking price in most cases.

    With constant market growth since 2012, one is left to wonder how long Tacoma can sustain this formidable run. While this has been an extended time of expansion and growth, there are few signs showing the Tacoma multifamily market will slow.

    Although construction costs and interest rates are on the rise, properties in the Tacoma market are still trading for record prices. Seattle continues to be the number one most-moved-to city in America by millennials, according to Business Insider.

    While rent increases and prices may slow, the number of high-paid renters continue to flow into Washington’s housing market. Overall, expect to see a steady, healthy and profitably multifamily industry in both Seattle and Tacoma for the foreseeable future.

    Austin Kelley specializes in apartment and investment sales. Born and raised in Tacoma, Kelley uses his local knowledge and networks to cover all facets of multifamily apartments in the South King County and Pierce County markets.


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