Seattle—The Seattle market has weathered the recessionary storm well, according to Kenny Dudunakis, senior partner in Hendricks & Partners’ Seattle office.
“We have good fundamentals; we have good job growth. We have people still moving into the Seattle area,” he points out. “Microsoft is on a perpetual hiring mode … Google has made a splash here, [and] Amazon continues to grow.”
The unemployment rate, however, hovered just above 9 percent in July, according to the Bureau of Labor Statistics.
In the apartment market, rents have increased as concessions burned off, and Dudunakis reports that the market has seen about 5 percent rent growth, with Class A apartment rents in infill locations pushing between $2.50 and $2.70 per square foot.
The overall market is about 5 percent vacant, according to Dudunakis, who notes that even Class C properties are “hanging in there.”
New deliveries—about 3,000 units—are slated to come online between 2012 and 2014.
As far as the transaction market, core deals are trading in the low-4 percent range, with what Dudunakis calls “secondary core deals that are B properties” trading in the high 4s. Product in secondary markets is seeing cap rates between 5.25 percent and 6 percent.
“Currently, we are getting more of the institutional deals hitting the market than we have in a long, long time,” Dudunakis tells MHN. And, he adds, distress never hit Seattle.
As far as new-development opportunities, he says, “you cannot find a garden site anywhere in the Puget Sound area. Anything built now will be mid-rise in outlying areas and high-rise in downtown Seattle. If you can find good quality mid-rise land in infill locations, that’s where you want to be right now.”
While the market currently shines bright, Dudunakis notes one potential negative force: too much high-end supply coming online. “We don’t know how deep that market is,” he points out.