MARKET SNAPSHOT: Seattle Apartments Could Face 10% Revenue Drop

By Erika Schnitzer, Associate EditorSeattle—The Emerald City’s revenue for 2009 is expected to bring down the national norm, according to M/PF YieldStar, which predicts that Seattle’s near-term investment opportunities are gloomy at best.Occupancy in the city is currently at 93.2 percent, down 3.1 points from 96.3 percent one year ago, reports Greg Willett, vice president of research and analysis for M/PF YieldStar, who notes that 2008 saw approximately 5,000 units in net move-outs.While the Bureau of Labor Statistics (BLS) is showing employment growth in Seattle at approximately 1.6 percent, Willett says that this figure is overstated and will need to be revised to take into account the recent layoffs at major Seattle companies, such as Microsoft and Starbucks, as well as the uncertainly of the fate of Washington Mutual employees. M/PF Yieldstar’s list of active developments in the metro shows about 8,000 apartment units now under construction, with all projects finishing by mid-2010. Willett forecasts that about 6,600 units will be delivered by the end of 2009. “When these projects were in the planning phases, Seattle was on top of the world,” Willett tells MHN. “But the world changed by the time they got started.”Previously, the metro saw an average of 3,000 units delivered annually. However, “despite the large number of products currently under construction, there is a high barrier-to-entry,” Willett notes.Because of the massive expansion in supply, Willett believes that Seattle will “rank alongside Phoenix and Austin in terms of revenue drops.” He says that while most of the country is looking at 4 percent to 5 percent revenue decreases, Seattle is facing a 10 percent loss this year.Despite all of this, Willett remains optimistic about Seattle’s future. “It is a metro that has a very attractive long-term employment outlook, and it normally outperforms the U.S. as a whole,” he asserts.