The December 7th issue of the Puget Sound Business Journal published a November Trends analysis of multi-family apartment rent for the SMSA (Seattle Metropolitan Statistical Area). Seattle rents dropped in that month .07%. The median rents were compared for both one bedroom, and two bedroom units. Multifamily rents going up or down in other areas varied significantly with Bellevue rents going up and in fact, exceeding rents in Seattle.
Starting over two years ago, the professionals of Seattle Commercial Real Estate began to predict, with apparently astonishing accuracy, what is happening in the multi-family market in greater Seattle. First the rate of increase in rents slows, then flattens. Next property managers decrease deposits and offer free rent incentives as a move-in consideration. In the meantime, the market has existing construction that produces more product, further exacerbating the decline in demand and then rents drop. We are confident in projecting that this trend will continue for at least another year or more. It should reach bottom at about the same time as we head into a form of national recession.
Seattle Commercial Real Estate is a strong advocate of “fertilizer money” which is the expenditure of funds to maintain properties so that rents give back the highest return. We also advocate for reserves and for large equities in our investment properties. We have been there before and we will be there again, so the real estate cycle is not a shock. It is, however, reality.