MARKET SNAPSHOT: Rents in Downtown Seattle Skyrocket as Vacancy Hits Multi-Year Low

By Philip Shea, Associate Editor

Source: Hendricks & Partners

Vacancy in the Seattle metro area hit 4.1 percent in the second quarter of 2012, the lowest rate in over a decade. The downtown area saw even greater occupancies, with vacancies there falling to 3.9 percent and average rental prices hitting $1,445 per month.

The tightness of the market here may be short-lived, however, as Hendricks & Partners notes that permit requests have soared in just the first half of the year. Multifamily developers requested permits for 4,136 units between January and June of 2012, nearly matching the total requests made throughout all of 2011.

As in other parts of the country, one major factor driving rent growth over the past two years has been the slow but steady recovery of the jobs market. Hendricks & Partners reports that 43,200 jobs were created over the last 12 months, translating to a metrowide employment growth rate of 2.6 percent. This means that the city outpaced both the state and the nation between 2011 and 2012, which had growth rates of 2 percent and 1.3 percent, respectively.

Seattle is home to Fortune 100 companies such as Costco, Microsoft and Amazon.com, as well as a large-scale operations center for Boeing. With increased production planned for certain plane models, Boeing expects to significantly expand its employment in the coming years; Microsoft also sees renewed employment as likely considering a 12 percent revenue increase during the last fiscal year.

Source: Hendricks & Partners

As was noted previously, the downtown area has seen the best performance so far in 2012. However, it is not the only area to benefit from increasing demand and constrained supply in the metro area. Vacancy rates in Bellevue fell 200 basis points—from 6.6 percent to 4.4 percent—between 2011 and 2012, and rents increased by 5.7 percent to a whopping $1,315 per month.

The Redmond/Bothell area also saw a marked increase in popularity, with vacancy falling 120 basis points to 4 percent and rents rising 3.2 percent to $1,240 per month. The only submarket to post average rents below $900 per month was the Kent/Auburn area, with vacancy coming in at 3.9 percent and rent at $894. This submarket is over 20 miles away from downtown Seattle.

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