SEATTLE Q4 - Mynd Property Management
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State of MYND SEATTLE Q4 2019
State of MYND
SEATTLE Q4 An Overview of the Rental
Housing Market
Rent Increases Spread Outside of the City been one of the leading metros for
new multifamily construction, primarily
The Seattle rental housing market remains
concentrated downtown. In fact, the city of
heated, with both domestic and foreign
Seattle is tied with Los Angeles for having
investors actively acquiring properties in the
the most cranes of and U.S. city, the majority
region. In terms of job growth, the metro
of which are for multifamily or mixed-use
area has outperformed the national average
projects with a combination of rentals
over the past few years, with many additions
and retail. From 2015 to 2018, the metro
in lucrative industries, such as high-tech and
increased its inventory by 14%, compared
life sciences.
to only 3% in Los Angeles. The Seattle metro
Well-heeled newcomers are contributing had roughly 8,000 more deliveries in 2015
to outsized demand for rental housing, a through 2018 than the L.A. metro did, and
trend that is expected to continue in 2020, it’s only one-third the size. In all, 11,114 new
especially near employment centers in the rental units were delivered the third quarter.
urban core and on the Eastside. However,
Developers continue to inundate the market
not everyone works for tech firms. As a
with supply, with more than 20,000 units
result, there has been greater demand
expected to come online over the next two
for lower-end rental units in the CBD and
years. Most development is rising near
peripheral submarkets, as well as nearby
employment centers in the urban core and
cities like Tacoma. Although Seattle has
Eastside submarkets. However Pierce, South
become increasingly unaffordable, new
King and Snohomish counties are also seeing
legislation incentivizes developers to build
an increase in rent activity. Renters in these
more affordable units in exchange for higher
areas can save up to 30% on rent, making
density in many neighborhoods.
the long commute worthwhile in some
Seattle Remains a Hotbed for New
instances. Communities like Legacy’s 229-
Construction unit Maverick in Burien cater to residents
that want to save money on rent and live
Over the past three years, Seattle has
1
State of MYND SEATTLE Q4 2019
While most Seattle area
developments have
been concentrated in
and around downtown,
sizable projects have
surfaced in other urban
core neighborhoods such
as Ballard, Capitol Hill,
Queen Anne and the U
District. In the pipeline,
an EB-5 developer is
building U Place in the
U District. The 244-unit
property is slated to open
in 2020, with a mix of
studios, one-bedrooms
within a reasonable commuting distance and two-bedroom units.
of local employment centers. According
to CoStar, the property’s rents are nearly Light Rail Lines Boost Development
20% lower than comparable properties Transit-oriented development (TOD) has
downtown or in the Lake Union submarket. remained popular this cycle. In South Seattle,
Developers are betting big on Amazon’s TOD has taken place in areas like Columbia
continued growth, and building rental assets City, Othello Station and Beacon Hill. Several
within commuting distance. For example, the projects opened in South Seattle earlier
181-unit upscale Marlowe property opened in the cycle, with impressive performance
in February 2019 and was reportedly 48% in these communities. Most are within a
occupied by June. 20-minute ride from downtown Seattle. As
the light rail expands east to downtown
Many of the newest projects in the urban Redmond and north to Lynnwood, TOD
core contain more than 300 units. Most of projects will continue to take shape near
these projects are located in Denny Triangle those lines. The lines are not expected to
and Pike Place (West Edge), where zoning open until 2024, but developers are being
permits the development of luxury high-rise proactive. One example is the first phase of
towers. Towers built since 2016 downtown Rainier Pacific’s 600-unit Terrace Station in
have average asking rent of almost $4 per Mountlake Terrace, slated to open in phases
square foot, but with generous concessions, starting in 2020.
effective rents can easily decrease to roughly
$3.60 for new product.
2
State of MYND SEATTLE Q4 2019
rent hikes in the country this cycle. Annual
SEATTLE BY THE NUMBERS
rent gains have slowed since earlier years
in the cycle, but they are up compared with
11,114 levels recorded in 2018. Year-over-year rent
New Rental Units Delivered in Q3 2019
growth at the end of Q3 was 4.3% in the
4.3% metro area.
YOY Rent Growth in Q3 2019
Rent growth has exhibited the greatest
4.7% improvement in urban core submarkets.
Vacancy Rate in Q3 2019 Asking rent growth is now well above the
metro average in downtown Seattle and
Lake Union, after sluggish growth last year.
Eastside submarkets continue to add new Concessions are also commonplace in the
supply in response to strong demand. CBD, which has enticed residents to move
In Bellevue, the number of units under to new luxury buildings. It is not uncommon
construction totals more than 5% of existing for rents at properties in the urban core to
stock, and developments are not exclusive to command $4 a square foot, but concessions
downtown Bellevue anymore. For example, are highest in downtown submarkets with a
the 204-unit AMLI Spring District is slated to high concentration of these properties.
open by the end of 2019 in the heart of the
growing Spring District. The rental property As rents continue to rise downtown, demand
will cater to tech workers and families alike, from displaced renters has increased in
and will have a nearby light rail station by the submarkets of Federal Way, Auburn
2023. and Kent. Renters in these submarkets can
Property Owners Push
Rents to New Highs
Seattle’s dynamic
economy, combined
with the region’s
growing preference
for urban living among
all age groups, have
translated into strong
rental demand in
Seattle. As a result,
landlords have pushed
through some of the
largest cumulative
3State of MYND SEATTLE Q4 2019
expect to save 40% or more on higher-end South Lake Union and Google expanding in
units compared to properties downtown. Kirkland and South Lake Union. Microsoft
Rents are also on the rise in areas such has also commenced on its headquarters
as Everett, Puyallup and Tacoma. These expansion, with a 2.5 million-square-foot
submarkets feature strong rent growth due addition that will add up to 8,000 employees
to tight vacancies and low rents relative to in Redmond by 2024.
other areas in the region. The commute is
A preference for urban living and the lack
much longer to downtown Seattle, but the
of affordability keep people in apartments.
increased value appeals to many segments
Homeownership is hard to come by in
of the local population, including families.
Seattle, which has seen some of the
strongest price appreciation of any metro
Vacancies Tighten Outside the Urban Core
this cycle. Even high-paid tech workers
Strong employment growth and favorable struggle to find desirable homes in King
demographics make for stellar rental County: The median home price is roughly
demand in the Emerald City and surrounding $610,000, equating to $3,200 per month in
areas. Seattle benefits from a dynamic mortgage payments including insurance and
post-downturn economic expansion, and taxes at a fixed interest rate of 4%.
job growth at high-paying tech companies
remains healthy. As a result, vacancy Homeownership is more attainable in
currently stands at 4.3%. peripheral areas like Pierce and Snohomish
counties, where the average mortgage
Amazon has plans to add enough space payment is below $2,000 a month.
for more than 20,000
workers in the metro
by 2024, and Facebook
and Google have
plans to add around
half that amount of
space (combined) in
the coming years.
Much of this space is
on the Eastside and in
South Lake Union, with
Amazon expanding
rapidly in downtown
Bellevue, Facebook
expanding in Bellevue’s
Spring District and
4State of MYND SEATTLE Q4 2019
Apartments in these areas compete with was approved in 2019 and includes 27
single-family homes, but Seattle proper neighborhoods from Lake City down to
and the Eastside continue to exhibit robust Rainier Beach.
demand for high-end apartments units.
Renters have moved to peripheral areas
While apartment demand for high-end units in order to save money on rent. Areas
is strong, not everyone collects sizeable throughout South King County and South
paychecks from tech companies like Snohomish County offer renters the
Amazon or Microsoft. Rental affordability opportunity to spend less, while still being
is a major concern in Seattle, and demand relatively close to major job centers. For
for lower-end units has skyrocketed. Lower- example, Kent is 20 miles from jobs in the
tier properties currently feature some of CBD and South Lake Union, but rents there
the lowest vacancies and most robust rent are around 15% lower than the metro
gains. average. The submarket is also close to
the Sounder Train, making their commutes
Affordability Remains a Major Issue easier. Vacancies in South King and South
To address the affordability issue, the City Snohomish counties have decreased
Council passed legislation to build more significantly over the past few years, and
affordable units in 2017 and 2019. Over these areas have vacancy rates well below
40,000 households in Seattle are paying the metro average.
more than 50% of their income on rent, and
the rate continues to grow. As part of the
“grand bargain,” developers are required to
include affordable units in new apartment
projects or pay into a fund to help build units
elsewhere. New developments will have to
include between 5% and 11% of units as
MYND Property Management
affordable, depending on the neighborhood. (833) FOR-MYND
In exchange for more affordable units, the Prepared by:
Stacey Corso Enrique Jevons
city agreed to upzone many of the city’s Senior Communications Manager Regional Director- WA
stacey.corso@mynd.co enrique.jevons@mynd.co
commercial and residential areas. It is
estimated that this will generate about 6,000 Disclaimer: The information contained within this report has
affordable units over the next 20 years, been obtained through our research and from sources believed
to be reliable, but no representation or warranty is made,
only a small fraction of the total pipeline. expressed or implied, with respect to the fairness, correctness,
accuracy, reasonableness or completeness of the information and
Neighborhoods upzoned in 2017 include opinions. Additionally, there is no obligation to update, modify
or amend the materials contained herein or to otherwise notify a
the U District, Downtown, South Lake Union, reader in the event that any matter stated herein, or any opinion,
projection, forecast or estimate set forth herein, changes or
Chinatown/International District, and some subsequently becomes inaccurate.
parts of Central Seattle. The latest upzone
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