Apartment Development Supply
“Seattle ranks number 1 for new apartment construction in the 50 largest US cities,” according to an October 5, 2017 The Seattle Times article by Emily Eng by the same title. South Lake Union, Belltown, and Queen Anne account for 20% of this expected development. In the third quarter of 2017, more than 5.400 apartments were delivered, the most completions in any single quarter on record, according to the Fourth Quarter 2017 Seattle-Tacoma Metro Area Multifamily Research Market Report by Marcus & Millichap.
The graph below gives you a snapshot of Seattle’s apartment development supply as of January 1, 2018, showing the number of units completed between 2012 and 2022 according to the Dupre + Scott online Development Report. We have seen a huge surge in development in the last five years (nearly 29.000 units). In the next five years, we have another 35,000 new units coming online. The closer we are to the delivery date of these apartments, the more likely these units will be added to the rental stock. However, the further out the forecasted unit delivery, the higher the likelihood that the delivery of those units could be delayed or even cancelled. Just in the last 6 months, developers revised delivery timelines because of construction delays including issues with weather, labor, and materials, and increasingly, challenges with city permitting and building inspections.
At the end of 2017, we saw two of our favorite apartment researchers, Patty Dupre + Mike Scott announce their retirement. In their December 27, 2017 Goodbye Video, they mentioned a few interesting shifts in the apartment development market from when they started in the industry 40 years ago: Developers used build a project in about 12 months, but now projects are taking 19 to 24 months or longer. With increased zoning density, most of the new development projects being built are larger scale, mid-to high-rise projects, as opposed to 2-3 story wood frame construction.
Small Efficiency Dwelling Units (SEDUs)
In 2017. the City Council moved away from allowing micro units in favor of SEDUs. According to the September 7, 2017 article, “Small apartments, big profits: A wave of SEDUs are coming to Seattle” by Marc Stiles from the Puget Sound Business Journal, developers will open nearly 2,300 efficiency units in Seattle in 2018. These units will both rent and sell at higher price per square foot averages.
Seattle Zoning Changes & Increased Density
Rezones under the Housing Affordability and Livability Agenda (HALA) for Uptown Queen Anne, University District and South Lake Union have passed. This year, more rezones are expected to pass in other in-city neighborhoods including Upper Queen Anne, Ballard, Capitol Hill, Eastlake, Fremont, Green Lake, Roosevelt, Greenwood, and Phinney Ridge. These rezones will have interesting effects on the apartment market, including paving the way for smaller-scale in-fill apartment projects which haven’t penciled for 10 years.
Contact us it you would like more information on proposed zoning maps and how these changes could affect your property’s highest and best use and of course, value.