Apartment rental market trends

Published March 26, 2012

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The market vacancy rate in the Puget Sound region dropped to 4.7% in March from 5.3% last September. Vacancies are lower in all unit types. The biggest improvement since last fall was in 3 bedroom units, where vacancies fell from 6.3% to 5.4%. Market vacancy rate

The “market” vacancy rate excludes vacancies in new properties in lease-up and properties going through major renovation. Adding those results in a “gross” vacancy rate of 5.2% currently, down from 5.7% last fall.

Rents peaked in late 2008 at an average $996 and bottomed out in early 2010 at $945. Since then they rose almost 7%. Although rents didn’t increase much over the winter, in the past twelve months they climbed 4.2%.

Add in the reduction in rent concessions, and revenue gains were even more significant. Only 26% of the properties we surveyed offer concessions, down from 60% two years ago. And the amount of the concession has dropped to $469. Concessions average $528 just six months ago. Concessions should become rarer, at least for a while. But with all the new construction scheduled to open over the next 12 to 18 months, expect concessions to return.

Developers opened fewer than 1,800 units last year. That’s one of the lowest production years in the past forty years. They are about to make up for lost time though. Our preliminary research of new construction activity for our spring Apartment Development Report shows developers will open more than 5,000 units this year, and as many as 8,000 units a year for the next two years.

Almost two-thirds of the properties we surveyed pass through water, sewer, and garbage charges to residents. That hasn’t changed much over the past few years. But the amount they charge residents has changed a lot as a result of rising utility costs. Our annual Apartment Expense Report, published a few weeks ago, found the median charge to residents for utilities was just over $48 a month last year,up almost 16% from 2010.

Just over 60% of the properties surveyed this month include parking in the rent. Properties that charge for parking get an average of $52 for open spaces and $89 for garages.

Managers are getting more bullish about increasing rents. This is clearly the year to do it. Our survey found managers plan to increase rents 2.6% in the next six months. That’s the biggest increase they have planned since 2008.

These are some of the findings of our spring survey of 20-unit and larger apartments in the Puget Sound region, completed on Friday, proofed over the weekend, and published today in the March Apartment Vacancy Report. We collected detailed information on 88.5% of the units in our market. That’s 210,593 units in 2,094 properties.

We couldn’t do this research without the tremendous support we get from our Professional Property Management Panel of Experts.

Editor’s note: Log in to your account or create a free account to view the following table showing the average rent change by neighborhood in King County over the past 12 months for each of 35 neighborhoods.

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May 10, 2012

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