Apartment rents likely to keep rising through 2012
Renters are paying more as vacancies shrink, but next year could reverse the trend, real-estate analysts say.
Seattle Times business reporter
Apartment rents are rising in King and Snohomish counties and should keep inching up for the rest of the year, two leading research firms agree.
But that could change in 2013, they say, when a bumper crop of new projects is completed and the vacancy rate is likely to increase.
Average monthly rent for the first three months of this year was $1,094, up 1.7 percent from the fourth quarter of 2011, according to Apartment Insights Washington.
Dupre + Scott Apartment Advisors, whose methodology is different, pegged the average rent in March at $1,066, up 1.1 percent from the firm's last report six months ago and nearly 5 percent from March 2011.
Tom Cain of Apartment Insights and Mike Scott of Dupre + Scott attributed rent increases to several factors: job growth, rising demand from young adults, little increase in apartment supply.
But the region is in the midst of its biggest apartment-construction spurt in two decades. Cain calculates more than 3,100 units in complexes of 50 or more units will be delivered this year, with another 5,500 coming in 2013.
Next year's big bump in supply should make landlords "justifiably apprehensive," Cain wrote. He said rents could start dropping — or at least begin rising more modestly — by late 2013.
Scott's new-construction projections, which include complexes with 20 or more units, are even higher than Cain's. Anticipated job growth alone won't fill all those units, he said.
The vacancy rate, which Scott's firm calculates at 4.2 percent, could climb to 6 percent by the end of 2014, he added.
But vacancies could remain low if employment growth exceeds expectations, Scott and Cain both said.
Apartment Insights calculated the two counties' first-quarter vacancy rate at 5.21 percent, down a hair after an unexpected increase of more than half a percentage point in the fourth quarter of 2011.
"It seems like it's stabilized," Cain said.
But falling home prices and low interest rates could turn more renters into buyers, he added, and that could reduce demand for apartments.
Other highlights from the two firms' reports:
• More than 80 percent of the apartments under construction in King and Snohomish counties are in Seattle, according to Apartment Insights.
• In-city neighborhoods had the region's lowest vacancy rates, both firms say.
• Nearly 79 percent of landlords participating in Dupre + Scott's survey said they plan to raise rents over the next six months, by an average of 3.9 percent.
• Average rents topped $1,500 for the first time in downtown Seattle and downtown Bellevue, Apartment Insights reported, and average rent per square foot in downtown Seattle hit a record $2.03.
• Fewer landlords are offering incentives like free rent now than six months ago, Dupre + Scott said, and the dollar value of those incentives has fallen.
Eric Pryne: 206-464-2231 or firstname.lastname@example.org