SEATTLE-With the economy still stalled and no immediate recovery in sight, it is not surprising that the Puget Sound area apartment market is experiencing its highest vacancy rates in several years.

According to a recent report prepared by Hendricks & Partners, net move-outs outpaced net move-ins, resulting in negative absorption of 87 units, the second quarter outperformed the negative absorption of 206 from a year earlier. New online units for the second quarter totaled 702, topping the 570 units reported from the second quarter of last year. The report says more than 1,160 units are expected to be finished in the second half of this year, concentrated mainly in the submarkets of Downtown (316), Lynnwood/Edmonds (274) and Bellevue/Issaquah (247).

Multifamily permits for 2,024 units were issued in the second quarter, down slightly from the permits issued for 2,128 units last year, according to Hendricks & Partners. More than 3,800 units over the past year, coupled with people doubling up, returning home or leaving the state, have lessened apartment demand and driven up vacancy rates. Reduced rent and concessions have become increasingly common as the overall average vacancy rate rose for the fourth consecutive quarter, leaving the second quarter with 7.2%. Downtown Seattle posted the highest vacancy rate of 10.1% and the Federal Way/Kent/Auburn are posted the lowest rate of 5.2%.

Affected by heightened vacancy rates, average rent increased by 0.9% from $876 in second quarter2001 to $884, but fell short of the 7.0% increase experienced in the previous year’s second quarter.Reflecting higher-end properties, Redmond / Bothell (-1.3%) and Issaquah / Bellevue (-1.7%) werethe only submarkets to demonstrate negative rent growth, the report states.

On the sales front, 12 multifamily properties traded hands during the first six months of 2002, as compared to 17 from the first six months of 2001, the report says. The bulk of sales in both years consisted of properties built in 1989 or before, with the price per unit averaging $81,567, compared to $72,016 from 2001.

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