According to a recent report completed by Dupre + Scott Apartment Advisors for CB Richard Ellis, the overall Puget Sound vacancy rate in the second half of 2003 was 7.6%, only a slight decrease from the first half of 2003. The upside is that growth, population and net migration, key indicators for the health of the apartment market, are expected to show improvement in 2004.
According to The Puget Sound Economic Forecaster, published by Conway Pedersen Economics, employment growth is expected to increase 1.2% in 2004 and 2.3% in 2005. Population growth is expected to increase over the next two years reaching 0.9% annual growth in 2005, when the population of the Greater Puget Sound region will be 3.4 million.
And the Washington State Office of Financial Management anticipates a net migration increase between 2002 and 2005, after falling between 2000 and 2002. OFM expects net migration will be 31,070 between 2003 and 2004 and 34,360 between 2004 and 2005. Longer-term projections of net migration have 221,500 people moving to Washington State between 2005 and 2010. The Puget Sound Economic Forecaster predicts net migration for the Puget Sound area alone to reach 10,600 people by 2005.
Looking at rents, Dupre + Scott found that in the past six months average monthly rents in Puget Sound decreased 0.12%, to $809 per month. Additionally, a record-high 70% of apartment owners have offered significant concessions, usually free rent for one or two months, according to the report.
Average monthly rents fell on the Eastside, the Southend and Snohomish County while rising in Seattle and Pierce County. In Seattle, average monthly rents increased a region high 2.5% to $895 per month. Average Pierce County rents inched up 0.1% to $675 per month, according to the report. Average rents on the Eastside fell 0.2% to $976 per month. Average monthly rents in the Southend and Snohomish County fell 1.6% to $741 per month and $762 per month, respectively.
On the investment side, the report found apartment sales volume increased from $301 million in the first half of 2003 to $363 million in the second half of 2003, while cap rates dipped slightly from 7.31% in the first half to 7.25% in the second half.
In the second half of 2003, 64 properties larger than 20 units traded ownership. The average price per unit of $62,358 was a slight decline from the first half of 2003 when the average price per unit was $64,784.
The report found that the Southend has been a particularly attractive market for investors over the past three years, with an average sales volume of over $200 million each year. In the second half of 2003, with just over $116 million transacted, the Southend outpaced the first half of 2003 by $41 million.
In Snohomish County, sales volume rose dramatically, from just $17 million in the first half of 2003 to $80 million in the second half of 2003. Sales volume in Seattle fell from $58 million in the first half of 2003 to $39 million in the second half of 2003. Sales volume declined on the Eastside from $79 million to $41 million in the second half of the year.
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