"Vacancy is on pace to fall to its lowest level since 2001, which is allowing property owners in many submarkets to raise rents and begin to withdraw concessions," says Gregory Wendelken, regional manager of M&M's Seattle office.
Vacancy is dropping in part because payrolls are expanding. Employers in the Puget Sound region are expected to add a total of 46,400 jobs in 2005. "The manufacturing sector, which has been the biggest drag on the local economy in recent years, appears to be stabilizing," according to the report. "Boeing has begun hiring again after reducing its work force by nearly 40% in previous years."
Countering the demand side is a 25% increase in apartment construction relative to 2004. However, the 2,000 units expected to come on line this year are still below activity just a few years ago. Completions reached 6,100 units in 2000 and averaged 4,300 units per year from 2000 to 2003.
Apartment vacancy rate is on track to fall to 7% this year. While still higher than the market's historical average of 5.2%, this is the lowest vacancy rate since 2001. Moreover, apartment absorption is on track to reach nearly 3,700 units this year, which is more than the number of units absorbed during the last two years combined, according to the report.
All this means the average asking rent is expected to reach $818 per month by year end, a 1.6% increase from 2004. As well, concessions have decreased to 6.5% of asking rents from 7.1% in 2004.
The situation has buyers--especially those from the less affordable West Coast market--flocking to the area and bidding up prices. Indeed, the median price per unit jumped 17% to $85,000 last year and has climbed to $91,400 per unit so far in 2005.
Recent complexes not bought for conversion include JER Partners out of Los Angeles paying $72,896 per door for the 15-year-old 352-unit Covington Farms complex in Everett that is 96% leased and Essex Apartment Value Fund II paying about $150,000 per unit for Echo Ridge, a five-year-old 120-unit complex in Snoqualmie that also is 96% occupied.
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