Greg Laycock, senior director of C&W's multifamily investment division, says while acquisitions dropped dramatically last year in the Seattle metro area to $538 million from $900 million for 1999, owners simply wanted to hang on to their properties and enjoy the cash flow and value gains brought by the past five years.

According to the report, sellers continued to benefit from the lowest cap rate in 20 years. The average cap rate for 2000 was 7.53%, a drop of 27 basis points since 1999. Sales on a per-sf basis have increased from $82.83 in 1999 to $84.88 at the end of 2000. Sales for the King-Snohomish-Pierce county region averaged $68,072 per unit in 2000 and expenses averaged $2,933.

For the sixth consecutive quarter, multifamily investment maintained its share of the market at 14%. Pension funds and REITS were definitely active on the purchase scene and included Equity Residential, Avalon Bay, CALPERS and Lend Lease.

Laycock said investor sentiment continues to remain favorable in Seattle due to prices rising over 8% (compounded annually) over the past five years. Rents have grown 4% over the last year and are projected to be about 3% for the next three years, returning to 4% in 2000.

Occupancies, barring an energy crisis and a national economic downturn, are to remain above 95% during the next several years, C&W reported. All of the major indicators suggest a continued strong rental market with demand outpacing supply in spite of the new product that has opened recently.

A total of 3,585 units were completed in 2000 with expectations for an additional 4,700 units during 2001. With 4,582 units absorbed in the Tri-County area, demand for multifamily housing in the Puget Sound last year exceeded the supply. For 2001, demand is expected to subside to 3,500 units, causing the overall vacancy rate to increase from 3.8% to 4.5% with rental growth forecasted at 3.3%.

The average rent for the region at the end of 2000 was $758, representing an increase of 4.7% from the previous year and far below the 6% to 8% percent increases over the past few years, the C&W report states.