Seattle Commercial Real Estate News of the Day

Tuesday, March 27, 2012

Seattle Times Daily Journal of Commerce Headline
Seattle-area home prices fall in January for sixth month in a row

Apartment managers feeling bullish about raising rents

Apartment rents likely to keep rising through 2012 Two new reports show the region’s apartment vacancy rate is dropping and rents are rising.

Dupre + Scott reports that the vacancy rate for stabilized properties is 4.7 percent. That’s down 60 basis points from September. Rents have increased almost 7 percent since bottoming out in early 2010, and more than 4 percent in the last year.

A report by another Seattle company, Apartment Insights, puts the first quarter vacancy rate at 5.2 percent. This comes after the vacancy rate unexpectedly rose last quarter to 5.25 percent.

The two companies’ reports track the market differently. Dupre + Scott looks at properties with more than 20 units in the five-county metro area between Thurston and Snohomish counties. The latest Apartment Insights report is for stabilized properties with 50 or more units in King and Snohomish counties.

“This quarter’s results show that the rental market is in good shape,” Tom Cain of Apartment Insights said. He said new units coming to the market this year should not be cause for concern, but “one can be justifiably apprehensive” about the 5,540 units expected to hit the market next year.

Developers will open more than 5,000 new units this year in the region, according to preliminary research by Dupre + Scott, and as many as 8,000 units will open annually for the next two years. Fewer than 1,800 units opened last year, one of the lowest production years in four decades.

Dupre + Scott reports that over the last year, rents increased in all areas of King County except one: Kirkland. The largest increases were in the Rainier Valley (27 percent) and the Central Area (19 percent), but these big hikes were due to the addition of new stabilized properties to the company’s survey.

Rents were down 1 percent in Kirkland. Elsewhere, rents increased from about 2 percent in Wallingford/Greenlake to almost 10 percent in East Bellevue.

“Managers are getting more bullish about increasing rents,” the Dupre + Scott report states. “This is clearly the year to do it.”

Dupre + Scott’s survey found that managers plan to increase rents 2.6 percent in the next six months. That’s the biggest increase they have planned since 2008.

Rents in two submarkets broke into the $1,500 range for the first time this quarter, Apartment Insights reported. Average rents in downtown Bellevue hit $1,520, or $1.76 a foot. Downtown Seattle averages $1,512. Downtown Seattle is the first to surpass $2 a foot rents. Rents there are $2.03 a foot.

Revenue growth for landlords also is increasing because fewer properties are offering concessions to attract tenants. Only 26 percent of the properties Dupre + Scott surveyed offer concessions, down from 60 percent two years ago. The value of concessions is also declining, from an average of $528 six months ago to $469.

Dupre + Scott said concessions should become rarer, at least for awhile. “But with all the new construction scheduled to open over the next 12 to 18 months, expect concessions to return.”

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About CRE Northwest

Specialist in office & investment real estate in Seattle & the Eastside
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