We've watched all the cranes around Seattle, now we're starting to see the effects. A new report by Dupre + Scott Apartment Advisors of Seattle shows the apartment vacancy rate in the city of Seattle has hit a seven-year high and is growing faster than anywhere in the Puget Sound region.
The report analyzed information for 252,552 units in 2,428 properties (with at least 20 units) in a survey that ended Sept. 21, and shows a 4% vacancy rate for the Seattle market, up from 3.3 percent in March. (Vacancy rate excludes new properties that are still in lease-up). The gross rate (which includes new units) is 6.8 percent, up from 5.1 percent.
As a region, Puget Sound’s gross vacancy rate exceeded 5 percent for the first time in four years, at 5.4%, up from 4.8% percent this spring. Climbing vacancy rates are slowing down rent increases across the region- rents are up 7.8% from a year ago, when Dupre + Scott said rent growth peaked at 9.2%.
Given this new data, investors should expect the rental market to soften over the next couple of years, as developers plan to open 62,000 rental units between 2018 and 2020. That is in addition to the more than 12,000 new units expected to open this year and 14,500 units in the tri-county area next year in King, Pierce and Snohomish counties.
Unit demand in the tri-county area has averaged 9,000 units a year over the past three years, and in the past 12 months has totaled just under 7,500 units. A year ago demand peaked at 10,500 units, so given this kind of supply hitting the market, investors should plan for higher vacancies and fewer rent increases.