SEATTLE—The Seattle-Tacoma rental market is one of the most robust in the nation, led by flourishing employment that has generated a spike in demand for apartments. That is according to a recent Q4 report from Marcus & Millichap.
"Developers have been scrambling to keep pace with the growing need for housing, adding more than 30,000 rentals to inventory during the past five years. Deliveries will reach a new peak of 12,000 units in 2015, which is expected to be matched next year."
Still, the report says, vacancy continues to tighten as housing prices soar beyond the reach of many tenants, contributing to climbing rents. "This is creating a sizable need for more affordable housing, especially in downtown Seattle, which has received the bulk of the luxury high-rises."
And city officials have responded with a proposal that would require affordable rentals to be included in every new multifamily or commercial development. Builders could either add floors to include the units or pay into a fund. According to the report, "this should result in even higher-density mixed-use projects in the metro core."
With no signs of the job market cooling, demand for apartments should remain strong, the report says, boosting NOI.
The report predicts that investors will remain active in the metro's vibrant multifamily market and new projects will expand offerings. "Institutional buyers will target recently completed stabilized assets, especially near the Seattle core or on the Eastside, which may require some developers to offer concessions to reach full occupancy quickly," the report says. "This could temporarily flatten rents in areas where multiple buildings are leasing up at once."
Other investors, the report adds, are seeking value-add opportunities and "intense competition for these assets in select neighborhoods has driven prices higher at cap rates that can dip below 4%."
Rising valuations, coupled with escalating renovation costs in some areas, have pushed prices above the threshold required to capture desired returns, the report notes. Accordingly, the report says that buyers may have to move farther from the core to find properties properly priced for value-add plays. "As valuations approach all-time highs and with a perceived lack of exchange opportunities, some sellers will finance the sale of their properties, allowing them to spread out gains while maintaining a steady cash flow."
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
