Rental demand - and rents - likely to rise
Predicted 4% Rise in 2014
Rents around Seattle are predicted to rise 4 percent in 2014, but robust development could lead to an oversupply and possibly even conversions of for-rent units to condominiums. Those forecasts are part of a mostly rosy picture Marcus & Millichap painted for the Puget Sound region in its 2014 apartment report.
The commercial real estate brokerage, which has an office in Seattle, expects builders to deliver 8,100 new apartment units in the region during 2014, about a hundred fewer than last year. Most of the building boom is concentrated in the Seattle urban core, with the downtown and adjacent areas to the north accounting for nearly 60 percent of apartments added during 2013.
Marcus & Millichap ranked Seattle No. 7 among top-performing markets nationwide. That's a drop from last year's 5th place ranking. The downgrade is attributed to the region's second consecutive year of what the report termed "elevated completions."
Low for-sale inventory, pent-up demand, and a resumption of bank financing for condo projects are motivating developers to target units for condo conversions. The report also noted the first large downtown project in six years is slated to deliver 700 new units in 2015.
The firm's analysts expect stable, broad-based employment growth to generate rental demand. They also noted "the low cost of capital and investors' desire for properties outside the urban core will support transaction volume in the first part of 2014, though rising interest rates could restrain deal flow in the second half."
Marcus & Millichap analyzed 46 markets, including Seattle, for its latest apartment reports. The brokerage, which specializes in commercial real estate investment services, has more than 1,100 investment professionals in offices nationwide.