Seattle multi-housing market overview
One of the driving forces that has helped keep the Seattle multifamily market in equilibrium is rapid in-migration coupled with job formation and wage growth
Total multi-housing transaction volume in 2018 in the Seattle and Tacoma MSAs resulted in roughly $4.17 billion across 120 trades of $10 million or more. Core cap rates remained unchanged in the very low four percent range, and we expect them to remain flat as we move into 2019.
Class B value-add cap rates showed continued compression to the mid to high fours. They are beginning to converge onto core cap rates for select, large, well-located, institutionally owned 1990s value-add assets. Looking ahead, we don’t expect to see many cap rates of more than five percent in Seattle unless you’re looking at older, garden-style product in tertiary markets.
The Seattle-Bellevue-Everett market (Seattle MSA) saw new supply deliveries in 2018 totaling 9,517 units, representing year-over-year inventory growth of 2.3 percent. This rate of inventory growth outpaced the national average of 1.6 percent by 70 basis points. The development pipeline will peak in 2019 with 13,137 units expected to be delivered MSA wide. New supply deliveries are expected to taper in 2020 and 2021 as the headwind of continually increasing construction costs stymies the economic viability of new development projects.
Despite record new supply deliveries in the Seattle MSA, average occupancy remains strong at 95.2 percent, while effective rents grew steadily during 2018, achieving three percent year-over-year growth. One of the driving forces that has helped keep the Seattle multifamily market in equilibrium is rapid in-migration coupled with job formation and wage growth.
Anchored by a burgeoning technology and information services sector, Seattle continues to draw young, affluent renters from across the U.S. at a rapid pace. Seattle’s population grew by 18.7 percent between 2010 and 2017, compared to the national average of 5.3 percent. The Seattle MSA achieved year-over-year job growth of 67,300 or 3.1 percent in December 2018, significantly outpacing the national average of 1.9 percent.