A rift is emerging in the Seattle-area apartment market, the result of the very different pandemic realities for the city’s wealthy and less-wealthy residents.
Plummeting demand for luxury, city-center living has led high-end apartments to slash rents and offer gangbuster deals to lure new tenants. Meanwhile, rents in less-expensive markets have stayed flat or even ticked up since March as remote workers seek more space — and many laid off due to the pandemic migrate out of the city to cut costs.
Rents in Seattle, Bellevue and Redmond, the area’s most expensive markets, where two-bedroom apartments typically lease for between $1,850 and $2,130, have fallen by as much at 14% since the start of the pandemic, according to data from ApartmentList. This month Seattle rents dropped 4.2% from September, marking the seventh straight month the city has seen rent decreases.
The actual price drops, though, are likely even steeper. The ApartmentList data doesn’t factor in lease concessions like months of free rent, parking fee waivers or cashback deals — incentives that are now common among the Seattle area’s glassy, top-tier apartment complexes wooing new tenants.
More than 70% of large Seattle-area apartments built after 2017 — which tend to be concentrated in urban cores and packed with amenities like dog salons, gyms and rooftop terraces — are offering lease deals equivalent to more than one month of free rent, on average, according to CoStar.
The Kiara in South Lake Union, for instance, is offering three months of free rent for some units, as well as what amounts to a 30-day “try before you buy” guarantee: Renters who break their lease or change units within the first 30 days in the building won’t be penalized.
Down the street, the McKenzie building — billed as “5-star hotel style comfort and convenience nearly unheard of in the area” — is also offering three months free for new tenants who sign 18-month leases. AMLI South Lake Union is offering two months of free rent; The Perry on First Hill is offering one month of free rent and has slashed prices 20% on some units; REO Flats on Capitol Hill boasts 10 weeks of free rent, no security deposit and a $500 move-in credit.
“It’s been kind of a roller coaster,” said RJ Valera, a leasing manager at AMLI South Lake Union. “A lot of people have either moved back home, or bought houses … because people working for tech firms around here don’t need to go into the office.”
The last time area landlords dangled so many freebies in front of renters was in 2018, when a burst of new construction led to an apartment glut, causing vacancy rates to top 14% in South Lake Union.
Among buildings with 50 or more units, South Lake Union now has the highest vacancy rate, 9.5%, of any submarket in the Seattle area, followed by downtown Seattle at 8.5% and First Hill at 8.1%, according to RealPage. Across King and Snohomish counties, 5.9% of such units are vacant on average.
The pandemic has soured the appeal of apartment-tower living among those renters affluent enough to size up into a home instead, and historically low mortgage rates are prompting many to consider making the switch, tenants and real estate brokers say.
Many remote-for-the-duration employees are questioning why they’d continue shelling out for apartments in the city center when many of the amenities — live music, theater, in-person dining, transit, proximity to the office — that drew them to places like Capitol Hill and South Lake Union are closed, restricted or rendered moot during the pandemic.
But the largest factor driving people out of the cities and into the suburbs is a desire for more space, said Redfin broker Pauline Corbett.
“Nobody wants to be 20 minutes from Microsoft any longer,” Corbett said. “They want peace and quiet, and a yard for the dog — a home where the kids can have their own bedrooms, and a room for the Peloton.”
Amazon employee Ty Moessner and his girlfriend had been casually looking for a home since the beginning of the pandemic.
“My girlfriend is set up with an office in the dining room, and I’m crammed into a small guest room,” Moessner said. The couple — and their two dogs — “wanted more room to move around.”
Finally, on an Amazon listserv, they found their perfect house: A three-bedroom home in Lynnwood with an updated, mid-century-modern feel and a spacious kitchen. Moessner liquidated some of his Amazon stock to put 35% down and agreed to let the sellers continue to live in the home rent-free for up to two months after closing. The deal closed for $75,000 over the $535,000 asking price — still well under the cost of a typical home in King County, $753,600.
Lower-cost units defy trend
In yet another example of the pandemic hitting less-wealthy Seattleites harder than their wealthier counterparts, rents on lower-cost apartments haven’t budged.
In some cases, they’ve even risen since March.
Rents in more affordable Auburn, Federal Way and Tacoma have held steady over the course of the pandemic.
Two factors are keeping occupancy high in more affordable buildings, said CoStar analyst Jared Kadry, slightly inflating prices. Some workers who have been laid off, had their hours cut or experienced another pandemic-related economic shock are taking advantage of coronavirus eviction protections to stay in place. Others are downsizing into less-expensive apartments or moving in with roommates.
Jason Brolliar, the president of U-Haul Seattle, said truck rentals at the 56 area dealerships he oversees are trending up slightly over last year, in part because “a lot of people are having to move to smaller places so they can afford it, or find some other means to keep themselves afloat.”
Brolliar declined to say specifically how much sales are up. But truck rentals and self-storage tend to do well during periods of economic turmoil, as people downsize or lose housing. Investors are betting that trend will continue: The Blackstone Group, the world’s largest private equity firm, quintupled its self-storage holdings this week with the $1.2 billion purchase of Simply Self Storage.
Simultaneously, some remote workers who no longer need to be in the city center are moving away from the urban core into larger, more luxurious apartments in the suburbs, CoStar data shows.
Occupancy in top-tier suburban apartments jumped 3.4% in the last three months, compared to the spring, while downtown apartments saw occupancy drop slightly, according to the CoStar data.
A typical Seattle-area apartment costs about $1,700 a month, Kadry said. “In places like Shoreline, you can pay the same price for a much nicer place.”
That’s the plan of Amazon software engineer Charles Malo, who’s looking for someone to take over the lease on his one-bedroom balcony apartment at the Rivet in South Lake Union, renting for $2,450 a month.
“The gym restrictions around made me buy my own gym set and I needed the extra space,” he said. “It gets a bit claustrophobic for me to be in a single-bedroom apartment and I feel bad for my dog.”
Before the pandemic, “you work all day in an office next door and walk around downtown and enjoy life and people, and only go home to sleep,” he said. “When your apartment becomes the only place you see for both work and living, [combined with a] lack of socializing? You start to feel that it’s not worth the penny.”
Malo said he plans to find another rental in the suburbs, where he can afford more space for the money.
The local developments mirror nationwide trends of rents falling fastest in pricey coastal cities, according to ApartmentList, especially those — like Seattle, San Francisco and New York — with a high proportion of workers in sectors like technology that have embraced remote work.