Apartment Construction Falls with Rates, Occupancy

SEATTLE-Construction, occupancy and rents were down in the apartment market, yet values rose by 6.3%, according to the latest report from the mulitfamily advisory firm Hendricks & Partners.

The third quarter report cited new construction of upscale properties and appreciation of existing ones as the cause of the rise in values. As for everything else dropping, the weak economy is to blame.

Permits issued for multifamily construction decreased to 895 units in the third quarter from 1,545 units during the same 2001 period. Overall average vacancy rate increased to 7.1% in the third quarter of 2002 from 3.8% a year prior.

In South Seattle, average vacancy rate rose from 2.8% to 8.4%. Downtown Seattle, thanks to a large volume of new construction coming online, had the highest vacancy rate at 9.1%. The lowest rates were found in the Federal Way-Kent-Auburn market, where vacancy was 5.4%, and the Redmond-Bothell market, where vacancy was 5.8%.

The overall average rent fell by 0.4% over the twelve months ending September 2002, declining from $882 to $879 as incentives such as discounted rents and free rent on a one-year lease are being offered up to attract tenants. The new construction in Downtown Seattle rose rents by 2.4%, while rents in the second- and third-most expensive submarkets–Issaquah-Bellevue and Redmond-Bothell, fell by 3.8% and 2.5%, respectively.

A total of 18 sales were recorded during the first nine months of 2002, off from 25 sales for the same period in 2001. Prices continue to show strong appreciation, with the average price per unit rising from $70,186 to $80,295. As a result, M&M’s Seattle office is listing eight apartment complexes for sale, mostly in and around the Tacoma market.

Projects planned or under construction total nearly 6,500 units, including over 2,000 in Issaquah-Bellevue, more than 1,500 in Downtown Seattle and 1,150 in Redmond -Bothell. Moving forward, with Seattle voters having recently approved a $1.75-billion monorail system that will connect Ballard to West Seattle, neighborhoods in and around monorail stations are expected to witness increased development, especially of higher-density housing and mixed-use projects.