Despite Economy Apartment Demand, Rents Up
September 20, 2011
It was just reported that apartment rents in King and Snohomish Counties have reached an all-time high of $1,077, which is
indicative of the surging demand for apartments across the nation. The previous record was $1,076, set three years ago just
before the economy collapsed. Incentives are also lessening across the region and at $26 are $12 lower than in the second quarter.
Typically job creation drives demand, but in this instance the demand is being primarily driven by lack of new supply. In fact, in
2010 there were 5,240 apartment units delivered in the Seattle-Tacoma metro area. This year, there are just 910 units, which is
much lower than the annual average of 3,200 units delivered over the past 5 years.
At the same time, the rental vacancy rate in Seattle nudged slightly higher to 4.7%. However, this is still better than the national
average of 5.9%, and better still than the national vacany rate of 7.8% in 2010.
Encouraged by these trends, investors are snatching up apartment properties across the country. In the first half of 2011,
approximately $21.6 billion in multifamily properties changed hands, which is more than double a year ago. The average CAP rate
for these properties was 6.4% in the second quarter, which mirror local CAP rates.
Among other factors driving the apartment market is this the number of young adults moving out on their own, the number of
people displaced by home foreclosure, and the uncertainty in the housing market which is discouraging would-be homebuyers.