Tech Growth Fuels Apartment Market All Around Puget Sound

by Camren Skelton

From the hottest commercial submarkets, such as Downtown Seattle’s South Lake Union neighborhood, to far-flung suburbs like Lynnwood, the Puget Sound multifamily market has been firing on all cylinders lately.

David Young, JLL Capital Markets

David Young, JLL Capital Markets

Corey Marx, JLL Capital Markets

Corey Marx, JLL Capital Markets

A major reason for this is the huge growth in tech employment throughout the Puget Sound region. Tech employment in the region has grown almost 87 percent since 2001, and more than 80 tech-based companies have opened engineering offices in Seattle in the past five years.

Demand for engineering and creative talent has pushed salaries up. Salaries for tech workers in Seattle are 9 percent higher than the national average. Seattle offers the highest salaries in the nation for positions like vice president of engineering ($253,488) and director of product ($228,482).

Demand for talent is also having a major impact on demand for apartments.

In South Lake Union, where vacancy is 3.5 percent, demand among renters for apartment units continues to be strong. This is driving tremendous interest among multifamily investors. Newly built, high-quality properties like the 282-unit Radius apartment community lease up very quickly. A joint venture between Kennedy Wilson and Lefrak purchased the just-completed asset in February for $141 million.

Radius is a prime example of the quality and location investors are seeking in Seattle’s booming downtown areas. The expansion of major technology companies in the immediate vicinity of the building, combined with the attention to detail in each unit and common areas are what make properties like this highly sought after in the investment community.

Located in the center of a major office campus, Radius is within walking distance of South Lake Union’s more than 50 retail and 80 dining destinations. The nine-story building also includes two underground levels with 305 parking stalls and is LEED-Gold certified.

High-end amenity packages are sought out by renters in tech-dominant markets today. Features like roof decks, fire pits, a barbecue counter, pet park and state-of-the-art fitness center are very attractive to today’s renters.

While renter demand remains strong in Seattle’s downtown neighborhoods and closer-in suburbs, affordability is gradually pushing more renters to look to suburbia to stretch their rental dollars further when looking for the right floorplans and amenities.

Multifamily investors seem to have quickly grasped the trend. Many are buying up suburban properties faster than even newly built urban product. Last year, suburban acquisitions outstripped purchases in Seattle’s urban markets by almost $1 billion and investors are currently on a pace that will continue that trend.

— By David Young, Managing Director, JLL Capital Markets, and Corey Marx, Managing Director, JLL Capital Markets. This article first appeared in the June 2017 issue of Western Real Estate Business magazine.

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