Apartment boom may rein in rents
Vacancy rate is leveling off as landlords see competition from new projects, research firms say
Seattle Times business reporter
Landlords still hold the upper hand in the Seattle-area apartment market, recent reports from two research firms indicate.
But the tide could start turning next year, Dupre + Scott Apartment Advisors and Apartment Insights Washington agree.
For now, rents in King and Snohomish counties continue to climb, according to both firms.
Dupre + Scott, which this month surveyed nearly 90 percent of all complexes with 20 or more units, calculated the average rent at $1,103, up 3.7 percent from March and nearly 5 percent from last September.
Apartment Insights, which last month polled 99 percent of projects with 50 or more units, pegged the average third-quarter rent at $1,142, up 1.5 percent from the second quarter and 6 percent from a year ago.
Landlords are charging more because they can get more. Kevin Wallace, president of apartment developer Wallace Properties, told a recent industry gathering that his company achieved rents 10 percent above its preconstruction projections at its new Citizen project on Capitol Hill.
And all 107 units were leased within four months.
But the regional apartment-vacancy rate has stopped dropping, both Dupre + Scott and Apartment Insights say, and it should start inching up next year as a bumper crop of new apartment projects comes to market.
That means “rents will basically have to flatten out,” said Mike Scott of Dupre + Scott.
More landlords also are likely to start offering concessions such as a month’s free rent, he added.
“It’s unlikely that the rental market will be able to sustain its current momentum through the end of next year,” Apartment Insights’ Tom Cain wrote.
His firm said the third-quarter vacancy rate was 4.85 percent, virtually unchanged from three months ago.
Dupre + Scott said vacancies actually crept up a hair, from 4.21 to 4.27 percent, over the past six months.
Both companies attributed the stabilization in part to increasing competition from the for-sale housing sector. Low interest rates and rebounding home prices, as well as rising rents, have made buying more attractive to some erstwhile renters.
And those who continue to rent will have more choices soon — the region’s apartment supply is growing fast.
More than 10,000 units are under construction in the two counties and another 20,000 are planned, Apartment Insights said.
“At the very least, the next few years will produce more new units than we’ve seen in over 20 years,” Dupre + Scott said in its report.
Even so, 73 percent of landlords responding to that company’s survey said they plan to increase rents over the next six months.
The average projected bump: nearly 4 percent.
Renters pay more and must look harder for vacant apartments in close-in Seattle neighborhoods, according to both research firms.
The vacancy rate is just 2 percent on First Hill, 2.2 percent in the University District and 2.3 percent on Capitol Hill, according to Dupre + Scott.
The average third-quarter rent in downtown Seattle, Belltown and South Lake Union in August was $1,628, Apartment Insights said, second only to downtown Bellevue’s $1,756.
Neither firm includes in those calculations recently completed projects that still are leasing up.
Eric Pryne: email@example.com or 206-464-2231