Falling vacancy rates and rent increases mean concessions designed to lure renters — free months, free parking, added amenities — are on the decline.
Nina LeKim wasn’t necessarily looking to move, but she had a hunch she could do better than the $850 she’d been paying each month since 2001 for a one-bedroom apartment in Fremont.
Her apartment, while in a central location, didn’t have a dishwasher, washer and dryer, or parking — and despite its charms, she was ready for a better-outfitted place.
“I just thought for that much money I could get more,” said LeKim, 31, an analyst at Cingular Wireless. “I went online and I found a lot of options in my price range, and they offered more amenities.”
By April 1, LeKim had moved into a two-bedroom, two-bathroom contemporary apartment overlooking Lake Union. The apartment, a condo sublet off of Dexter Avenue North, includes parking (a relief since LeKim shelled out $800 in parking tickets at her previous address), a washer and dryer, dishwasher, skylights and access to a rooftop patio with a hot tub. It cost her about the same as her Fremont unit even though the landlord had wanted at least $1,200 a month.
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With some urging from the agent helping LeKim, the landlord was willing to negotiate because most renters with that kind of budget can buy.
“I stumbled upon a good piece of property at the right time,” LeKim said.
That LeKim could score a view apartment with good amenities and at a discount is the exception rather than the rule in the current marketplace. Dupre + Scott Apartment Advisors, a Seattle-based real-estate research firm, forecasts that renters face a 10 percent rent increase between March 2005 and December 2007.
As of March, Dupre + Scott reported that the average rent in the region was $794 a month. If it rises 10 percent, it will be $873.40.
The vacancy rate, meanwhile, is falling: As of March, the rate sat at 6.5 percent but is expected to dip below 5 percent by June 2006 and remain there through 2007, the firm said.
With these market dynamics, concessions designed to lure renters — free months, free parking, added amenities — are on the decline.
Joe Levin, a multifamily investment specialist at Colliers International, said that rents are on the rise throughout the region for a few reasons. The vacancy rate is declining because improvements in the job market are bringing more renters to the area. That means building owners can charge higher rent.
“When the economy starts to improve, you see rent increases over time,” Levin said. “As we talk to owners, we know they’ve reduced concessions. If you compare it to a year or two ago, there are fewer free rent signs out there.”
In fall 2000, 13 percent of apartments came with freebies, but by fall 2003, 70 percent offered concessions worth an average of $641 for a one-year lease. This summer, the company reports, that concession rate has fallen (64 percent), as has the average concession ($591).
Condo conversions are another factor — although, Levin said, a hard-to-quantify one. The number of available rentals has dropped as apartment owners have converted their units to condominiums that they could easily sell in a hot real-estate market.
Noticing the differences
JoAnn Whetsell, 28, a contractor at the National Oceanic and Atmospheric Administration, said she noticed a difference in the market between 2004 and 2005. In May 2004, she began renting a one-bedroom apartment off of Sand Point Way Northeast for $635 a month, a price that included $200 off the first month’s rent. But when she decided to move to a new place this spring, she found fewer, less appealing concessions.
“When I was looking the second time, I did notice there were fewer specials — and they were smaller, like half a month free versus a full month,” Whetsell said.
In April, she moved into another one-bedroom in the Pinehurst area, farther from her job. Her rent increased to $675, she said, but she got a dishwasher and washer and dryer with this unit. Whetsell doesn’t own a car but said if she did she suspects she might be able to still find deals and concessions in areas off of her bus line.
Some renters long familiar with the Seattle market are opting to move farther from the center of town to get good deals.
Rich Forrester, 33, a landscaper, has spent more than a decade in Seattle. He never thought his quest for a new lease would take him to Lynnwood. He hasn’t bought, he said, because he’s in the military. Between deployments he’s lived in several neighborhoods, most recently Wedgwood, where he shared a house until May 1. He had to move because the owner decided to sell.
Forrester said he looked at apartments but concluded that the market has turned in favor of landlords. He wanted a unit with a balcony or patio where he could barbecue and grow plants. Where he did find such apartments, landlords wanted lots of extra fees — many nonrefundable.
“They wanted first month’s rent, last month’s rent, a deposit, and demanded no pets, no smoking — no breathing!” Forrester said. “Landlords are now acting as if they’re doing renters a favor letting them live there until they can sell the property.”
Gone, he says, are the days when landlords offered rent discounts to tenants who commit to a two-year lease. Buildings he considered in Lake City, Capitol Hill and Ballard were available only month-to-month, leaving uncertainty about price increases or evictions because of a change of management or conversion to condos.
In Lynnwood, he shares a house he found on the online bulletin board Craig’s List. Forrester has three housemates — two of them young investors who co-own the home and all of them former apartment dwellers who were tired of renting. While there are tradeoffs to sharing space, he says, the amenities and $450 rent make it preferable to renting an apartment.
Paying to be landlords
The rental marketplace also is affected by costs apartment owners pay to be landlords. Higher insurance, utilities and other costs, even when not dramatic, are significant when rents haven’t increased significantly in years.
The costs of paying building staff and maintaining buildings are rising, Dupre + Scott said. Owners say health-care costs for property managers are rising, and the cost of replacing carpeting and other items is affected by fluctuations in oil prices. Owners can’t cover those rising costs unless they raise rents.
Buyers of apartment buildings face the same tight marketplace that residential homebuyers face, so they are paying more for buildings, making it difficult to offer concessions and specials.
Gail Duke, chief operating officer of Trammel Crow Residential in Kirkland, says her company has reduced concessions — from as much as two months’ rent free in 2004 to less than four weeks in 2005. The company is likely to increase rent over the next two years, she said. Trammel Crow manages six buildings in the Seattle area, each with more than 20 units, and is building three more.
But even with the changes, the vacancy rate hovers around 6 percent. And that, Duke says, is “a balanced market.”
“I don’t think the renters are expecting too much now,” she said. “Their focus will have to shift once they see the marketplace changing.”
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