Seattle arguably has the strongest apartment demand on the West Coast. In 2013, the market absorbed nearly 7,000 units, trailing only Houston, Dallas and Atlanta, according to MPF Research. At the end of the year, occupancy was 95.7 percent and rent growth over the past year reached 5.5 percent.
“I think even local real estate professionals were cautiously optimistic, but most didn’t see all this new product absorbing so successfully,” says Steve Yoon, director at Wood Partners. “It speaks to the strength of the economy and the desirability of living in the Puget Sound.”
The local economy of Seattle and the surrounding Puget Sound area is rocking and rolling. On average, it has added 30,000 to 40,000 jobs annually for the past several years and employment growth is expected to average 2.1 percent annually, according to Titcomb. The market has seen significant growth in technology jobs, drawing Millennials to the area.
“With lots of job additions occurring in the heart of the city and apartment construction very significant in and around downtown, Seattle appears likely to be the next U.S. metro that will offer a 24/7 urban core similar to the environments seen in Manhattan and the downtowns of San Francisco and Chicago,” Willett says.
Seattle is one market that apartment developers have targeted for future growth. “We’ve seen an infusion of developers and investors from outside the region and abroad,” Yoon says. “Seattle has a lot of great fundamentals that make investments attractive.”
Developers opened 8,000 new units in 2013—the highest level of production since 1991, says Gregory A. Laycock, executive vice president and managing director of Transwestern in Seattle. “The level of new supply of apartment units in the market has been a surprise,” he says. “At an average of 7,600 units per year, you would have to go back to the late 1980s to see more development in our market.”
Dupre + Scott Apartment Advisors expects 38,000 new units to be introduced to the market in the next five years, but that job growth will create 40,000 new renters over the next five years. Transwestern’s research shows that the region added approximately 52,000 jobs in 2013 and is poised to add another 52,000 jobs in 2014, with a total of 194,200 jobs over the next five years.