Apartment rents in the Seattle area rose faster in the past year than in any of the 81 other major U.S. metros tracked by a leading property-research firm.
New York-based Reis, which sells data to the commercial real-estate industry, reports the average asking rent in the Seattle area climbed 6 percent in the past 12 months, outpacing increases in other bustling tech centers such as San Francisco, San Jose, Calif., or Boston.
Another firm’s data put Seattle’s rent increases at fourth-highest in the nation, up from sixth just three months earlier, but concurs with the 6 percent growth rate.
According to Reis, rents here grew more than twice as fast as the national average of 2.6 percent.
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Across all apartment sizes, the Seattle area’s average asking rent in the second quarter was $1,150. (The area included in Reis’ surveys extends from King County up to North Marysville in Snohomish County.)
Even once price breaks such as move-in discounts are included, the average effective rents here have been growing at an annual pace of 6 percent or more, Reis reports.
It’s no wonder developers are completing more apartments in the region this year than during any year in the past 20. Strong job growth has fueled record demand for apartments, pushing vacancy rates down to very low levels.
“It’s all about the jobs,” said Kenny Dudunakis, senior partner at Hendricks-Berkadia, one of the nation’s largest apartment-investment advisers.
When Aspira in the Denny Triangle sold last year, the Seattle apartment building set a record, at more than $500,000 per unit, Dudunakis said. With investors keen on acquiring income-producing properties in such a strong market, soaring rents could push sale prices to $600,000 a unit, he said.
“People love the Fortune 500 companies that are here that seem to be on a perpetual hiring mode,” he said.
Another research firm, Dallas-based MPF Research, also reports apartments in the Seattle-Tacoma area saw a 6 percent increase in effective rent in the second quarter.
By MPF’s tally ranked Seattle fourth among the nation’s top 100 metros, up from sixth in the first three months of the year.
Only San Francisco, Oakland, Calif., and Denver saw a faster annual increase in effective rent for the latest period, said Greg Willett, vice president of research at MPF, whose parent company supplies software to the apartment industry.
Within the Seattle region, there’s a wide range of increases. MPF, which samples half the apartments in the area, found annual effective rent increases in the second quarter ranging from 4 percent in Federal Way to 10 percent in Issaquah.
The vacancy rate in King County last spring was 3.32 percent, the lowest since 1998, according to apartment-research firm Dupre + Scott.
Current demand for apartments in the Seattle area is “stunning,” Willett said. There were 10,034 more occupied units in June than a year earlier, putting the region second only to Houston in the number of units added over the past year.
“That just speaks to how strong the local economy is,” Willett said.
Rents are very sensitive to economic booms — and busts.
After the tech bubble burst, Seattle area rents fell as much as 5.7 percent. After the housing bubble burst, rents plunged as much as 10.1 percent during the Great Recession, MPF data show.
While the region’s rents have risen 6 percent over the past year, it’s far from unprecedented: Rents increased more than 7 percent annually in 10 consecutive quarters from the beginning of 2006 to the middle of 2008, according to MPF.
The pace of increases should slow down as developers open more apartments, Willett said. His firm forecasts rents to rise 3.5 percent annually over the next 12 months.
In King County, about 42 percent of housing units were renter-occupied in 2011, according to census data. In Seattle, 54 percent were renter-occupied.
Seattle Times researcher Gene Balk contributed to this report.