Rents in once sought-after Seattle neighborhoods like downtown and South Lake Union nosedived in 2020. Outside the city in less expensive neighborhoods, renters weren’t so lucky.
Across King, Pierce and Snohomish counties, rents dropped 3% compared with 2019, the biggest drop since the Great Recession.
Yet while average rents fell 14.2% near Lake Union, they rose 5.7% in Puyallup, according to December data from CoStar, which tracks commercial real estate and apartment rents.
Rents were down 6% in Ballard and up 4% in Tacoma. The $1,670 average asking rent for central Seattle, which includes Capitol Hill, is nearly matched by the $1,611 rent in outlying Pierce County, according to CoStar. (The data reflects average asking rents on apartments of all sizes, primarily in large apartment buildings.)
Rents in Seattle and other tech hubs have been driven down by employees who are suddenly able to move farther from expensive city centers, said CoStar senior market analyst Jared Kadry. Plus, a boom of pricey new apartment buildings opened as demand was shrinking.
The trends underscore a widespread pattern in the pandemic: While work-from-home policies allowed more affluent workers to move out of expensive city-center neighborhoods or become homeowners, those still grappling with the economic downturn aren’t feeling relief. About 290,000 people are still receiving unemployment benefits in Washington.
Before the pandemic, Alice Loh and her husband were spending about a quarter of their income on rent for a North Seattle town house where their 9- and 13-year-old daughters share a bedroom.
Then, stay-home orders decimated Loh’s work as a massage therapist and her husband’s work in the construction industry fluctuated. The couple drained their savings to pay for rent. They arranged with their landlord to split rent into two installments each month.
Months later, Loh’s business hasn’t fully returned.
“It just feels like you go to work, you bring home money and you never see that money again,” Loh said. “You’re constantly chasing that money and it’s never enough.”
Throughout the region, average rent rose $542 a month, or 34%, from 2010 to 2019, according to CoStar. Over the course of five years and two Seattle rentals, Loh’s rent went from about $1,500 to $2,000.
Loh said the cost of living makes her want to leave the city, but she’s staying put to keep her daughters in their school district.
For rent decreases to make a difference, “it has to be a dramatic change,” Loh said. “But how much can you reduce rent if the mortgage company is not giving the landlord a break? The whole system has to change.”
In a recent U.S. census survey, one in 10 Seattle renters were behind on rent payments and 24% said they had no confidence or only slight confidence about making the rent next month.
Another rent tracking firm, Apartment List, estimated that in the city of Seattle alone, rents dropped 19%. Median rent in the city in December was $1,195 for a studio and $1,677 for a two-bedroom, according to ApartmentList.
Some renters are looking to lock in better deals while the market is in a slump.
Special deals, like a month or two of free rent or free parking, became more commonplace throughout 2020. By December, 51% of Seattle-area rental listings on Zillow were offering some kind of deal, according to the company.
When Michael Zaton moved from West Seattle to Columbia City in March, he found a one-bedroom, first-floor apartment for $1,745.
By December, a top-floor unit opened in the same building for the same price.
“I latched on,” Zaton said. “In March, the same apartment would have been around $2,000. Not only do I pay the same rent but I’m locking it in for another 12 months.”
At Goodman Real Estate, which owns 8,000 apartments across the region, CEO George Petrie has signed off on longer leases for Seattle buildings than was once the norm, he said, sometimes up to 18 months at lower rents.
“Am I willing to take it?” Petrie said of a renegotiation offer from a tenant. “Yes. Why? Because I don’t know when Amazon is going to truly reopen, or Zillow, or fill in the blank.”
Rents in the company’s Seattle buildings have sunk 5% to 15%, and occupancies are down 10% to 20%, Petrie said. He expects the trend could last until the second half of 2021.
Buildings in Kent and in Pierce County, meanwhile, are 95% to 99% full and the company has kept rents flat or increased them, Petrie said.
Goodman’s aren’t the only buildings with apartments sitting empty.
The Seattle-area vacancy rate was higher in 2020 than at any point in the last decade, according to CoStar. The 7.3% rate was up from 5.8% from a year earlier.
New apartments will keep coming: About 19,000 new units are under construction in the region, equal to about 5.5% of existing units, according to CoStar.
Some investors are betting on exurbs and suburbs.
Last month, the investment firm Blackstone bought five apartment buildings in Renton, Federal Way, Kent and Lynnwood (where light rail is expected to open in 2024). The four South King County properties sold for $175 million, according to CoStar.
Some of those same areas have been hardest hit by the pandemic downturn. Federal Way and Kent are among the areas with the highest numbers of unemployment claims per capita during the pandemic, The Seattle Times has reported.
The sales could signal future rent hikes, said Kadry, the CoStar analyst: “This is definitely a function of people thinking they can raise rents in the long term in places like Federal Way and Lynnwood.”