Rental Housing Journal / On-Site January 2017

Turning Point or Seasonal Doldrums?

Seattle – The latest Apartment Insights survey shows a significant deterioration in a rental market that has been booming for the past five years.

Fourth quarters are typically slow, but this one is markedly so according to Tom Cain of Apartment Insights. The data are from his Seattle firm’s 4th quarter statistics and trends on 50+ unit properties in the King/Snohomish market.

VACANCY: 4.67%

The vacancy rate for our nonrandom survey of conventional, stabilized 50+ unit properties in the King/Snohomish market is 4.67%. It shot up from 3.99% last quarter. A year ago it was 4.32%.

Last quarter King and Snohomish were both at 4% vacancy. King took the biggest hit with its vacancy rate increasing to 4.73%. The rate in Snohomish went to 4.41% this quarter. The overall vacancy rate for both counties which includes properties in lease-up is 6.12%.

The Eastside South submarket is weak, registering the largest increase in the vacancy rate. It stands at 6.78%. Moreover, its 12.5% overall rate which includes properties in lease-up is the second highest rate in the two-county market. Nearby Sammamish/Issaquah has a 6% market and 9% overall rate.

Other submarkets with a market vacancy rate at about 6% are downtown Seattle, South Lake Union and SeaTac.

The tightest submarkets are around 3% vacant. These are Tukwila, North King County and the area north and east of Everett.


Rental incentives more than doubled. They had been at $6 for the last two quarters but are now at $14 per month. The number of properties offering incentives surged from 12% to 20%.


Overall, there were +1,046 units absorbed this quarter, down from +2,043 units in the third quarter. The Fremont/Wallingford submarket absorbed the most units at 260.


$1,576 per Unit

$1.90 per Square Foot

Rents dropped $12 to $1,576 per month and $1.90 a square foot. This represents a 0.76% decrease. Over the past 12 months rents increased 7.9%.

Rents are down in all three of the most expensive submarkets. They are downtown Seattle at $2,272 ($2.84/s.f.), downtown Bellevue at $2,119 ($2.47/s.f.) and South Lake Union at $2,065 ($2.69 s.f.).

The most affordable units are all in south King County. They range from SeaTac at $1,168/$1.47 to Tukwila and Des Moines, which are just under $1,200 per month.


There are currently 24,688 units under construction, up 1,318 units from last quarter. This is 3,100 units more than a year ago. Fifty-three percent of these are in the city of Seattle, 24% on the Eastside, 15% in South King, and 8% in Snohomish County.

There are 9,447 units that have either been built or are under construction for completion in 2016. A few properties may not hit their target dates by the end of the year.

Featured in the photo, the 84-unit Commons at Ballard opened recently. It is managed by Blanton Turner.

We have preliminary information for the next two years. We are tracking 13,876 units that are scheduled for a 2017 completion. Next year stands a very good chance of topping the highest volume year set in 1989. We’ll see. For 2018 the count is 10,744 units, a number that will get larger as we get closer to 2018.

The grand total for all of the units in various stages of the pipeline is 69,365. This is slightly less than last quarter.


This quarter’s performance is discouraging. Average rents dropped and the vacancy rate took a big hike. But historically fourth quarters show the market at its worst. In an attempt to put things into perspective we analyzed fourth quarter performance over the ten years prior to 2016.

In seven of the past ten years the vacancy rate increased. This quarter’s 0.68% rise in the vacancy rate is second only to the 1.2% increase which occurred right after the financial crash in 2008. Overall, fourth quarter vacancy rates averaged a 0.33% increase. Rents dropped $12 this quarter. They fell in six of the past ten years. The overall average was a loss of just under a dollar.

So, even though fourth quarter results have been negative historically, this quarter’s performance has been especially so. Also, the sudden and significant increase in rental incentives doesn’t bode well either.

Total nonfarm employment in October increased 3.6% over the year in King County.
This growth rate is exceptional. But local and national economists are expecting growth to slow.

Market performance during the past five years has been phenomenal. The quarterly vacancy rate nudged over 5% just once. The annual average rent increase during this time is 9.3%. However, this rate has been skewed upward somewhat due to the addition of more expensive new units being added to the inventory.

This past rate of rent growth simply cannot be sustained in an environment of slowing job growth and a likely record-breaking level of new construction in 2017. We believe the market may have peaked in the third quarter of 2016. Looking forward, we see rent increases slowing along with vacancies and rental incentives rising. This quarter appears to mark a turning point.

For decades Tom Cain has supported a variety of industry organizations and events with his data and expertise as a foremost expert in the apartment industry. His company surveys the five counties in Central and South Puget Sound.

This article highlights survey results that subscribers can access from an online database of all 50u+ properties. Apartment Insights also provides customized rent reports and market reports. or call: 206-632-2220.


Research by Apartment Insights Washington has appeared in the following publications:

The Business Examiner

The Daily Journal of Commerce

The King County Journal

Kitsap Sun

The Landlord Times

National Apartment Association Units Magazine

The News Tribune

The Olympian

Pierce County Economic Index Report

The Puget Sound Business Journal

Rental Housing Association of Puget Sound Update

Rental Housing Journal On-Site

Seattle Business Magazine

Seattle Metropolitan Magazine

The Seattle Times

Seattle Times/ Post Intelligencer

Snohomish County Apartment Operators Association Rental Gazette

Snohomish County Business Journal

USA Today

The Wall Street Journal