Strong job growth characterized the Puget Sound economy throughout 2011, with the region closing the year with a 1.7 percent gain that equated to the addition of more than 28,000 positions. Home to Fortune 100 companies Costco, Microsoft, and Amazon.com, as well as large-scale operations of The Boeing Company, Seattle’s economic prospects are assured.
The region will remain a leading employment generator over the next several years, with job growth trending up to 2.6 percent in 2012 and to more than 3 percent in 2013 as the metro area realizes the addition of 50,000 new jobs on average each year. For its part, Boeing now employs more than 81,000 Washington residents, having added nearly 8,000 local jobs in 2011 alone.
The Seattle multifamily market deal activity has been good this year, and the market should expect to close more than $800 million in transitions. Current cap rates in the market are in the low 4 percent range and up to $500 per unit in core locations with secondary markets averaging 5.5 percent to 6 percent capitalization rates.
One great thing about Seattle is that it has always skewed toward rental housing. In the three-county area alone, the population is 3.4 million, with only 220,000 apartment units, which accounts for 7 percent of the housing stock. Most Downtown Seattle renters are priced out of single-family homes. They instead choose to move into the city to eliminate their commutes and take advantage of all the amenities Downtown living has to offer. The 2011 vacancy for Downtown Seattle was 4 percent, with average rent increases of 2.1 percent equating to an average 2011 rent of $1,386.
Given all these positive economic indicators and the rapid expansion of Amazon.com in the South Lake Union area, developers are clamoring for land in the Downtown core. The Seattle office of Hendricks & Partners has two South Lake Union parcels under contract with several more Downtown parcels on the market or coming to the market in 2012. From Ballard to First Hill, there are about 5,000 units under construction or planned to start over the next year. There were no active lease-ups in the Downtown core in 2011 and there are no garden sites available anywhere in the Puget Sound region. As a result, everyone is building mid- or high-rise product in core locations.
Major apartment developers in the Puget Sound include the likes of Holland Partners, which has broken ground on several multifamily development sites in Downtown and Capitol Hill this year. According to a press release, Holland “plans to spend nearly $1 billion this year developing 1,800 new apartment units and buying 4,000 existing units in several West Coast cities.” Other active developers in and around Seattle include Avalon Bay Communities, Essex Property Trust, HB Capital, Security Properties, Equity Residential, UNICO and Goodman Real Estate. All of these developers are breaking ground in Downtown Seattle or its surrounding communities in 2011, and will deliver units in 2012.
— Kenny Dudunakis, senior partner in Hendricks & Partners' Seattle office