Rents in Seattle increased by 9.4% year-over-year through September, after growth rates peaked at more than 11 % year-over-year in the summer months. Still, the Emerald City remains far above the 5.0% national average. Although development is surging, the continued strong job growth will keep demand steady, which should keep rents moving up. But rent escalations are expected to moderate as new units are delivered to the market place as Dupree and Scott’s graph projects.
Rent growth was led by the working-class Renter-by-Necessity segment, which rose 10.0% to $1,413, well above the $1,219 national average. The high rate of growth exacerbates the affordable housing issue, and the few developments targeting low- and medium-income residents are concentrated in South Lake Union and the city’s core, at Beacon Hill. Rents in the upscale Lifestyle segment grew by 8.8% year-over-year to an average of $1,695. However, Lifestyle rents actually have shrunk since peaking at nearly $1,760 in June, a sign that there may be too much new supply targeting the luxury part of the market.
Submarkets with the highest rent growth are Bothell (17.1 %), Kirkland (14.1 %), SeaTac (13.7%), Edmonds (13.7%) and Central Everett (13.3%). Bothell has made a name for itself as the home of the main life sciences hubs in Seattle, while Kirkland is known as a technology hotspot, housing several gaming companies and startups.
Seattle has put the pedal to the metal in terms of new construction over the past two years. More than 8,600 units were completed in 2015, double what came online in 2012. Another 11,700 apartments are expected to be completed in 2016, increasing stock by 5.4%, almost double the national rate.
Despite growing supply, absorption is expected to keep pace due to high demand. Major employers such as Amazon, which recently announced its expansion to Bellevue, but also tech startups attract young professionals to the metro and increase the need for housing, especially in Puget Sound submarkets.
Roughly 21,000 units are under construction and more than 38,000 are in various planning stages, bringing the total number to approximately 68,000 apartments in the pipeline. New supply is concentrated in Belltown (5,664), Queen Anne (1,059) and Bellevue (1,002). A heavy increase in supply will likely weigh down rent growth in the following period.
