Apartment rents falling in Puget Sound area
Apartment rents in King, Pierce and Snohomish counties fell 2.9 percent in the past 12 months and are expected to fall further in the next two years as job losses and new construction affect the market, industry experts say.
Seattle Times business reporter
A shrinking number of jobs and a growing supply of apartments will continue to push the Puget Sound region's rents down next year as vacancy rates climb, industry experts predict.
"Job losses killed our market, and development buried it," Mike Scott, of Dupre + Scott Apartment Advisors, told landlords at an industry conference Tuesday.
The average monthly rent across all apartment types in King, Pierce and Snohomish counties fell from $988 to $959 during the 12 months ending in September, and a continuing decline through 2011 will further cut that figure to $889, Dupre + Scott projects.
One driving factor is a decline in jobs. Western Washington will lose 71,000 this year, and it's expected to lose an additional 19,000 in 2010, forecasts local consulting firm Conway Pedersen Economics.
Matthew Gardner, of Gardner Economics, said the region is "through the worst" of its job losses.
"I think that we're diversified enough that we can expect to go out of the recession by the first or second quarter of next year," and the housing market should follow, he said at the gathering organized by the Washington Multifamily Housing Association.
Microsoft's planned 5,000 layoffs won't hurt Western Washington's housing market too much because many of those job cuts are happening elsewhere, Gardner said. And while the fate of Boeing's 787 Dreamliner is "certainly very important" for the state's economy, it's "not crucial."
While demand for apartments is falling, the supply is rising.
So far, 4,100 new units have opened this year, and more than 2,000 others are expected to become available by year-end, according to Dupre + Scott.
The firm estimates that about 20 percent of the 6,000 condos completed in the past three years are also on the rental market now.
The combination of job losses and new units has upped the region's vacancy rates from 6.6 percent last spring to 7.2 percent now, and heading toward 9 percent next year, the firm said.
A"significant jump" in vacancies in Pierce County has contributed to the overall regional increase, the firm found. Meanwhile, Kitsap County's vacancy rate of only 5 percent is the lowest in the Puget Sound area, largely because "there's been no new apartment construction in Kitsap for a while."
To attract renters, landlords have lowered rents, and six out of 10 are offering concessions worth an average $757, according to the firm's research.
Scott said that in the last four years, an "echo-boom" of 30,000 to 40,000 people aged 20-34 — a demographic group that traditionally rents, rather than buys — has come into the market.
A lot of them bought houses because of easy financing before the housing market crashed.
But twice as many "echo-boom" members are still coming into this market.
"Market to the Gen Y group," Scott advised the landlords.
"You've got to get into their head and make a product that they want."
Overall, Scott said, real estate in the region "will be a very tough investment market" in the short term, but things should start to turn around by 2011.
"A slow recovery is better than being in a tailspin," said Scott. "We are on the way out, but it will be a slog going forward."
Kaitlin Strohschein: 206-515-5618 or firstname.lastname@example.org
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