Going Crane-Counting in Seattle: Something Has to Give

by Wolf Richter, Wolf Street:

There are 67,507 apartment units in various stages of the pipeline.

It’s kind of hard to wrap your head around this apartment construction boom that started in 2012: In the Seattle area, there are currently 23,572 apartment units under construction in large buildings of 50 or more apartments. Of them, 58% are in the city of Seattle, 24% on the Eastside (suburbs east of Lake Washington), 9% in Snohomish County to the north of Seattle, and 9% in South King County.

This year alone, 11,660 units in these large buildings have either been completed or are scheduled to be completed, according to Tom Cain, of Apartment Insights, whose database tracks buildings with 50 or more apartments (so not including smaller apartment buildings and single-family homes and condos on the rental market). In the report, Cain adds:

We have preliminary information for the next several years. We are tracking 14,293 units that are scheduled for a 2018 completion. For 2019 the count is 7,053 units, a number that will increase as we get closer to 2019.

The grand total for all of the units in various stages of the pipeline is 67,507.

The last three years have seen near record-breaking levels in excess of 9,000 units per year. 2018 appears to be a monster year for new construction.

And crane counting has become a thing. David Calder commented on WOLF STREET:

Last count, a few weeks ago, we had 61 cranes in Seattle with many sites waiting for new cranes to arrive.

Paul Allen’s Vulcan [Vulcan Real Estate, part of the Microsoft cofounder’s investment empire] is still buying and still plans on ripping up whole blocks in the Central District, evicting many.

Plywood signs on lots all over the city are proclaiming some new high-rise catering to those with big paychecks. If there is an end in sight in Seattle, none of us on the ground here can see it.

In the second quarter, 2,340 units were absorbed by the market. In other words, landlords found someone with a paycheck big enough to rent the new unit. This absorption rate matches approximately the annual rate of completions over the past three years of 9,000+ units per year.

But in 2017, a total of 11,660 units are likely to be completed. And in 2018, so far 14,293 units are scheduled for completion. In his report, Cain says: “We expect it to ease the pressure on rent increases.”

But that hasn’t fully happened yet.

In June, the median asking rent for one-bedroom apartments in multi-family buildings of all sizes rose by 7.9% year-over-year to $1,910, essentially matching the record in May, based on data from Zumper; and for two-bedroom apartments, rents rose by 4.2% year-over-year to $2,500. It made Seattle the eighth most expensive rental market in the US.

Cain, looking at his data set of buildings with 50+ apartment units for the second quarter, comes to similar conclusions. Rents in these buildings surged 7.6% year-over-year to $1,667 per month, and $2.01 per square foot. They ranged from $1,193 ($1.53 per square foot) in Des Moines to $2,393 ($3.02 per square foot) in downtown Seattle.

And rental incentives dropped on average to $7 per unit per month, from $13 in Q1. Only 14% of properties offered incentives in Q2, down from 21% in Q1.

Calder, from his boots-on-the ground view, sees the rental situation in Seattle this way:

I’ve been on a voter drive and have gotten to see how many renters live. These aren’t one bedroom but one room rents with a tiny side room that passes for a kitchen in a 1920 building; $1,700 and going up. All of the $4,500 one bedroom places on Broadway (Capitol Hill) are rented.

The vacancy rate in Q2 in “stabilized” buildings (buildings that have reached stable occupancy) in King County, which includes Seattle, and Snohomish County ticked up to 4.2%, from 3.9% in Q2 2016, according to Cain of Apartment Insights.

Read More @ WolfStreet.com