Seattle – Apartment Insights statistics show market vacancies stabilizing for the second consecutive quarter, but rents continue to fall, reports Tom Cain of Apartment Insights. The data is from his Seattle firm’s fourth quarter statistics and trends on 50+ unit properties in the King/Snohomish market.
VACANCY: 6.8%
The King/Snohomish market posted a 6.8% vacancy rate for conventional, stabilized properties, unchanged from the previous quarter. On the surface it appears that the vacancy rate has stabilized for the time being, but in the current market situation, it is especially important to look at the overall picture. In a deteriorating economy coupled with a huge increase of new units, one would intuitively expect the vacancy rate to be increasing. At this juncture it is very important to look beyond the traditional way vacancies are reported. The 6.8% vacancy rate is the market rate. This does not include recently opened properties in the lease-up phase. The gross vacancy rate, which includes all units including those in lease-up, is 9.1%. It has averaged 9.1% for the last three quarters.
The relative large number of properties in lease-up compared to the existing stabilized inventory has caused the gap to widen to such a degree. A year ago in the fourth quarter, the gap was much smaller because there weren’t that many properties in lease-up. The market vacancy rate was 5.9% and the gross vacancy rate was 6.4%.
Three submarkets showing the greatest improvement from last quarter were Des Moines (8.9%), Mountlake Terrace (6.1%) and Seattle North, Central (4.8%). SeaTac is the weakest submarket with a 10.4% vacancy rate. The Snohomish North, East submarket which includes Marysville and Monroe, registered the greatest increase in vacancy rate, but this area still boasts the lowest rate among submarkets at 4.4%.
The Bellevue West submarket, which is basically downtown Bellevue, remains unchanged from the third quarter at 6.9%, which is about the King/Snohomish average. However, this submarket has seen more new construction relative to its size than any other submarket. The impact of the properties in lease-up on this submarket is dramatic. The gross vacancy rate for Bellevue West is 20.8%.
Broken down by county, the vacancy rate is lower in Snohomish (6.6%) than in King (6.9%). Snohomish County has seen very little new construction, and this is the primary reason that its vacancy rate is lower than King.
RENT INCENTIVES: $102 (10.0%)
Rent Incentives have inched up to $102 per unit per month and 10.02%. Last quarter they were $94. This increase is modest compared to previous quarters. As a percentage of the rent, properties built between 1970 and 1989 are experiencing the highest rate of incentives, averaging about 11.5%. The level of incentives is higher in Snohomish (12.3%) versus King (9.4%).
ABSORPTION: 1,447 Units
There were 1,447 units absorbed this quarter.
RENTS: $1,017 per Unit
$1.20 per Square Foot
Unlike the vacancy rate which remains unchanged, rents took a hit this quarter. Rents declined $21 per unit, or 2%, to $1,017 per month. Rents peaked at $1,076 per month in the third quarter of 2008.
Submarkets experiencing the biggest rent decreases this quarter are Seattle Downtown, followed by Eastside South, Sammamish-Issaquah and Redmond. In this group, declines ranged from $84 to $55 per month.
NEW CONSTRUCTION
2,573 units opened this quarter, more than in any other quarter since we began our research in this market five years ago. This brings the total for the year to 5,931 units. This is nearly double the number of units constructed in 2008. 2009 will be remembered as the year new construction spiked. Among the recently opened properties is Legacy at Pratt Park at 1800 S. Jackson St. in Seattle. Legacy Partners developed and manages this 248-unit mixed-use property.
Those looking for good news for the rental market may take some solace in the fact that next year’s total will be far less, 3,326 units. Better yet, there is nothing for 2011 and beyond except in planning stages. Half of the total units that will open in 2010 are in Seattle, and are fairly evenly distributed among its submarkets. A third of the total will be completed on the Eastside, where more than half are in downtown Bellevue. The balance will open in south King County.
There are 3,553 units in various planning stages. Seventy-four percent of these are slated for the City of Seattle.
OBSERVATIONS
The recent leveling off of vacancies and the moderate rise of rent incentives in properties that are not in lease-up is heartening. However, the $21 dive in rents and the gross vacancy rate increase to 9.1% this quarter is proof of the market’s continuing decline.
Based on Washington Employment Security Department’s monthly statistics, there are about 17,200 fewer jobs since July based on preliminary numbers in November. Employment declines are projected into 2010. The 3,326 units that are scheduled to open next year are significant, and will negatively impact the market. We expect that the rental market will continue to erode next year.
Tom Cain of Apartment Insights is a member of the nonprofit Central Puget Sound Real Estate Research Committee in charge of providing apartment rent and vacancy data. Tom has been a member of the Committee for over 25 years, and has been researching apartment market trends in the Seattle area since 1978. His company surveys the five counties in Central and South Puget Sound.
This article highlights survey results that subscribers can access from an online database of all 50u+ properties. Apartment Insights also provides customized rent reports and market reports. www.apartmentinsightswa.com 206-632-2220
The Landlord Times: Your source for multifamily and apartment news and landlord, property management, property maintenance & real estate investing tips.
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the current market situation, it is especially important to look at the overall picture.the vacancy rate which remains unchanged, rents took a hit this quarter. Rents declined $21 per unit, or 2%, to $1,017 per month. Rents peaked at $1,076 per month in the third quarter of 2008.The recent leveling off of vacancies and the moderate rise of rent incentives in properties that are not in lease-up is heartening.custom logo
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Tom Cain of Apartment Insights is a member of the nonprofit Central Puget Sound Real Estate Research Committee in charge of providing apartment rent and vacancy data. Tom has been a member of the Committee for over 25 years, and has been researching apartment market trends in the Seattle area since 1978. His company surveys the five counties in Central and South Puget Sound.wedding photographers in phoenix
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