Seattle rents rise as apartment construction booms

Seattle’s hot job scene continues to push up apartment rents, although a building boom may soften the market next year, according to two new reports.

Average rent is now $1,338 in King County, up 5.4 percent both from six months ago and 9 percent from a year earlier, Dupre + Scott Apartment Advisors reported Monday.

Tom Cain, of Apartment Insights, reported that rents in King and Snohomish counties rose 2.5 percent in the third quarter and 8.1 percent over the past year.

The rent increases includes many new apartments, which tend to rent for more, Dupre + Scott principal Patty Dupre noted in the report. Take out new apartments, and the region-wide rent increase falls from 4.7 percent to 3.9 percent since March, and from 8.2 percent to 6.3 percent over the past year.

Because of up and down cycles, rents have gone up by an average of just 3.4% a year since 1997, Dupre said. “The increases we’ve seen lately aren’t unusual when the economy is strong. But they happen less often than investors think, and they barely make up for the downturns.”

Nearly three-quarters of landlords Dupre + Scott surveyed said they planned to raise rents another 4 percent by next March.

The King County vacancy rate is 3.4 percent, which is unchanged from March but down from 3.8 percent last September, according to Dupre + Scott. Cain reported vacancy at 4.3 percent in King and Snohomish counties, up from 4.17 last quarter but down from 4.4 percent a year ago.

Across the region, the “gross” vacancy rate, which includes new buildings in lease-up, is 4.7 percent, down from 5 percent in March, according to Dupre + Scott. Similarly, Cain reported a gross vacancy rate of 5.86 percent, down from 6.35 percent.

“The drop in the gross vacancy rate means that demand is still outpacing supply which is helping new units lease up,” Dupre said in her report. “There are 8,900 units in lease-up today and they are already 74 percent occupied.”

Seattle’s economy takes the credit, or blame, for this, depending on your perspective. The Dupre + Scott report noted that Conway Pedersen Economics reported the region added 48,200 jobs since the third quarter of last year. So far this year, the number of people in the region exchanging out-of-state driver’s licenses for Washington licenses is up 17 percent from the same period last year.

While lots of people are moving to Seattle, developers also are building lots of apartments. Dupre + Scott report that 8,700 apartments are hitting the market this year and they expect another 12,000 next year.

Cain expects 8,106 apartments to hit the two-county area this year, up from 5,233 in 2013, with another 11,231 coming next year.

This will soften the market and increase use of rental concessions, such as free months of rent, the experts said.

“The potential cloud on the horizon has been and continues to be the amount of new construction,” Cain wrote, adding: “These numbers suggest that the market will weaken slightly through 2015. Yet, if the current level of economic growth continues, the market will still be healthy next year.”

Right now, just 14 percent of apartment buildings in the region are offering concessions, and those concessions average $600, Dupre + Scott reported. Cain reported that 17.5 percent of buildings in King and Snohomish counties are offering concessions, down from 20.9 percent last quarter, and those incentives averaged $8 per month down $1.

Concessions are already rising in areas with lots of new construction, such as central Seattle, where they average $1,215, according to Dupre + Scott.