Area Apartment Market Still Desirable

SEATTLE-Rents and vacancy rates in the local market are down but still desirable, according to CB Richard Ellis’ Puget Sound Apartment Report for the first half of 2001.

“Most investors are happy to have a 5% or less vacancy rate,” says Frank Bosl, an apartment expert with the brokerage firm. Given that the highest rate (in what CB breaks out as the Seattle market) is 3.7%, investors must be dancing on their desks.

From the numbers, Seattle’s Denny Regrade appears to be the hottest spot, with a vacancy rate of 1.1%. Rents in that area, which include the rising Downtown bedroom community of Belltown, increased by only a modest 0.79% during the first six months of the year. However at an average of $1.84 per sf, they are by far the highest among the five Seattle neighborhoods.

Speaking to the high rents and low vacancy in the Denny Regrade, Bosl says, “It is one of the more desirable neighborhoods now.” It wasn’t always that way, but Seattle’s leaders liked the urban village/high-density concept they saw in Vancouver, BC, and they decided Belltown and Denny Regrade should become that in Seattle.

Bosl says the area is hitting the critical mass needed to be a 24-hour live/work area, with a multitude of high-density residential projects and retail moving in the last few years. “It’s within walking distance to employment and retail centers, has established retail and restaurants and new businesses moving in all the time.” Add to that the spectacular views of Elliott Bay offered by a number of residential properties, and Bosl says it all adds up to a great place for apartments.

Bosl attributes the relatively flat rents in Denny Regrade Bosl to a spike in supply. “A number of new projects are in lease-up, making the market fairly competitive. These higher-end projects are coming on line at a time when the economy slowed a bit.” The good news is that because the area is so desirable, the new product is being well absorbed. And, with traffic conditions in Puget Sound only expected to worsen, most experts expect a continued migration (by those who can afford it) to the urban residential communities.

As for the remaining four areas of the Seattle market, the Downtown/First Hill neighborhood came in second place with average rents of $1.58 per sf. This translates to a six-month increase of 7.48%–the highest in the market. Shoreline posted third in rents ($1.10 per sf) and a flat 2% vacancy.North Seattle experienced the only decrease in average rents, moving –0.92% during the first half of the year. However, the area’s vacancy rate was a respectable 2.10%. Last on the list was West Seattle/White Center, averaging only $0.94 per sf in rents. It also had the highest vacancy rate at 3.7%.

As to the near-term future, the Puget Sound Economic Forecaster is predicting a slowing in employment growth in 2002 (1.6%) compared to its projection for 2001 at 1.7%. The publication is also anticipating an up-tick in population growth to 1.5% next year, and a 0.02% increase in unemployment next year to 4.8%. While these projected figures may not bode well for the overall economy, they do look good for the apartment industry as economics have many holding off on the purchase of a home until better days arrive.