Local apartment rents continue climbing

http://www.seattletimes.com/business/local-apartment-rents-continue-climbing

Rent hikes in King County show no signs of letting up, despite a huge wave of new apartments.

Landlords expect to increase rents by an average 3 percent between September and March, reports Dupre+Scott, a local apartment-research firm.

That’s on top of a whopping 7.5 percent increase in rents over the most recent 12 months — among the highest rent hikes in the nation over the past year. The increases have come as developers opened more than 7,000 apartment units in King, Pierce and Snohomish counties.

The average asking rent for a one-bedroom unit in or near downtown Seattle is $1,438, up 8.8 percent over the past year, Dupre+Scott reports. On the Eastside it’s $1,262, up 9.5 percent from the same period last year.

That’s the biggest annual jump Dupre+Scott’s fall survey has recorded since 2007, fueled by strong job growth and the opening of thousands of new apartments, which generally rent for higher rates.

Another data provider, New York-based Reis, recently reported the average asking rent in the Seattle metro area climbed 6 percent over the 12 months ended in June, faster than any of the 81 other U.S. metro areas it tracks.

“We think the rate of increase is going to slow down next year and in 2015 just because of all the new construction in the market,” said Mike Scott, the Seattle research firm’s co-owner.

This year, next year and 2015 each will see more apartments built in the region than in any of the previous 20 years. By 2017, developers could add as many as 42,000 units to the region’s supply.

About half those new units will be in Seattle, much of it concentrated in or near downtown, where Amazon.com and others are hiring thousands of new employees.

Hard as it might be to imagine, some might view the rents here as cheap.

Millennials, or the generation born between the early 1980s and early 2000s, are flocking to Seattle from more expensive metro areas, according to research by commercial real-estate brokerage Jones Lang LaSalle.

In New York, renters in that age group spend roughly 70 percent of their income on housing, reports JLL, which compared millennial income data from PayScale.com to its own data on rents. In San Francisco, it’s about half their income.

In Seattle, rent consumes about 30 percent of millennials’ income.

“Everyone’s building here because of that,” said David Young, a Seattle-based managing director overseeing apartment investment sales for commercial brokerage Jones Lang LaSalle.

Those transplants could eventually push rents in Seattle to San Francisco levels, he said.

The hottest local submarket is Capitol Hill, where rents rose 6.9 percent from mid-May to mid-August and 13 percent over the past year, said Tom Cain, owner of Apartment Insights Washington, another research firm.

“It’s astonishing to me,” he said.

The most affordable areas in King County are in southern parts like SeaTac and Des Moines, where monthly rents average $873 and $883, respectively, he said.

But even in the more expensive urban core, renters can find cheaper rents by looking at older buildings — if there are vacancies.

In and around downtown Seattle, rents for one-bedroom units built since 2008 average $1,805, while rents in units built before 1980 average less than $1,100, according to Dupre+Scott’s data.

But that gap may be shrinking. As a group, units constructed before 1980 saw a 7 percent hike in rent over the year, the biggest jump among different vintages of buildings.

On the Eastside, units built before 2000 saw generally higher jumps in rent than newer ones.

“Owners of older product are upgrading their properties to compete with the new product,” said Chasten Fulbright, a principal at Blanton Turner, a Seattle property-management firm.

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com On Twitter @sbhatt