"Those investors who have already invested here see the slow-down as an 18-month market aberration that we're already well into," Stoner says. "Many people here are anticipating positive job growth in the second half of this year, translating to lower vacancy rates the first part of next year and rent increases by late spring of 2003. So, even if it's a bit flat now, they see an acquisition now as a good investment."
Those local investors also hold a competitive advantage, says Stoner. "New investors need time to educate themselves about the area and they can't move as quickly as the individuals who already know North Seattle," says Stoner. "Inventories here have shrunk."
In a market report recently released by Paragon, Stoner says sales transactions in 2001 dropped to 49 from 66 in 2000 while the average price-per-unit rose 10% over the past year to $92,505. Stoner says this demonstrates the market's endurance and "the reason why local investors have made it one of the most sought-after investment markets in the Pacific Northwest."
According to the report, rent rates in North Seattle have flattened with rising vacancies. Older, one-bedroom units are now fetching an average of $1.00 per sf to $1.15 per sf—with newer properties hitting between $1.20 per sf and $1.45 per sf. Two-bedroom apartments in comparable properties are running $0.90 per sf - $1.04 per sf and $0.97 per sf - $130 per sf in older and newer buildings respectively.
Stoner says about half of apartment owners in the sub-market are now offering rent concessions—most commonly a $200 deduction from the first month's rent. But in an effort to pass along overhead, Stoner notes a major trend among landlords: retrofitting properties to allow for utility bill-back meters for water and sewer. This, he says, provides a profit-enhancing practice while avoiding rent increases.
Stoner concludes that the area will continue to experience a high demand for its investment properties as investors search for more stable investments in an unstable economy. And, once economic forces reverse flow toward recovery, increases in both rent and North Seattle demand.
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