SEATTLE, WA - Seattle-area apartment vacancy rates will climb this year, in part because supply will increase as more condominium buildings revert to rentals, two forecasters told a landlords group Wednesday. But they disagreed on whether rents will rise or fall in this turbulent economy.
More than 100 condo buildings in King, Snohomish and Pierce counties, many of them apartments originally, are becoming rentals again because the units haven't sold well in this down market, said Greg Wendelken, vice president and regional manager for brokerage Marcus & Millichap.
That, in combination with rising unemployment, will push the regional apartment vacancy rate to about 7.7 percent, Wendelken said, up from 5.6 percent last year and 4.3 percent in 2007. Jim Hebert, of Bellevue-based Hebert Research, forecast a smaller increase, from 4.1 percent last year to 4.8 percent this year. Vacancies won't rise much more than that unless the market is significantly overbuilt, he added.
Hebert and Wendelken spoke in Bellevue at a membership meeting of the Rental Housing Association of Puget Sound. Wendelken said he expects rents will slip about 2.7 percent this year. Several weeks ago, Marcus & Millichap had forecast increases of about 2 percent, but Wendelken said those projections were revised to reflect the most recent economic bad news, including Boeing layoffs.
Hebert, in contrast, said rents should rise, in part because demand will increase as more people find buying or owning problematic. "We'll see some rapid rent increases, because apartments are a better place to spend your dollars rather than homeownership," he said.
In a recent poll that Hebert's firm conducted, 27 percent of central Puget Sound residents said they expect to increase savings this year, while just 8 percent said they expect to take on more debt.
That, too, is good news for rental-property owners, Hebert said. It suggests people are more likely to remain renting while they save for down payments on houses or condos. Wendelken said the next two or three years will be challenging for landlords. But he, too, saw some silver linings.
Marcus & Millichap recently rated Seattle the No. 5 apartment market in the country. And the region's long-term economic prospects still appeal to investors, Wendelken added. "There are a lot of good things happening in Seattle," he said. "You probably couldn't own in a much better location."
Source: SeattleTimes.com