Real Estate Buzz: Will hot apartment market ever cool off?
Seattle's apartment market is roaring, with few signs of quieting down over the next couple of years.
Dupre + Scott Apartment Advisors reports more than 37,000 new apartments will open between 2013 and 2017 in King, Pierce and Snohomish counties; 32,000 of them will be in King County alone and 21,000 will be in Seattle.
Experts say new units are filling up quickly, a sign that demand is strong. Much of the surge can be attributed to Seattle's ascension as a top-tier city.
Amazon.com keeps growing and it will spend much of the decade building a 3.3 million-square-foot headquarters. Unemployment in Seattle is just above 4 percent, and real estate investors mention Seattle in the same breath as New York, San Francisco and Los Angeles.
“Amazon today is what Microsoft was back in the 90s, with rapid growth,” said Phil Assouad, senior vice president at Kidder Mathews. “Anytime you have a company that is more than doubling its footprint, that growth will be sustainable for at least the next five to seven years.” All this bodes well for apartment developers.
Giovanni Napoli, senior vice president at Kidder Mathews, said Seattle has become a 24-hour “gateway city.” Amazon's growth is bringing people here from all over, and most of them want to live in apartments.
The regional apartment vacancy rate dropped to 3.8 percent in the second quarter, according to Kidder Mathews. Seattle's vacancy is 2.46 percent, according to Dupre + Scott.
Kidder Mathews predicts the vacancy will keep dropping until mid-2015, when most of new apartments will be finished.
But that doesn't mean the bottom will drop out of the market. Assouad and Napoli see the market hitting a plateau in a couple of years, and say it could start growing again after that. They think Seattle still has room for rents to rise, unlike New York and San Francisco.
A societal shift is another reason people are more bullish about apartments. Studies suggest the “Millennial Generation” is taking longer to settle down, get married, buy homes and start families, and is opting instead for in-city housing, closer to night life and transit.
“This younger generation is growing up watching a lot of people get burned on the housing market,” Napoli said. “For a lot of people, maybe owning a house isn't the American Dream we once thought it was.”
Assouad said he thinks as millennials age, they will consider the suburbs. He said he moved out of the city when he had children, and he expects many others will too.
But the suburbs will need to change to attract millennials. They'll want more amenities and transit, similar to what is available in downtown Bellevue.
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