The regional apartment market might be softening just a bit, which would be welcome news for renters who have seen double-digit rent increases compared to last year.
Apartment vacancy rates in Pierce and Thurston counties are climbing, according to a report from the Seattle research firm Apartment Insights.
Plus, Pierce County is seeing record levels of apartment construction, which means rents could rise more slowly as more apartments come online.
More vacant apartments means more to choose from in a market where median rents in Pierce County have climbed at historic levels — a 17 percent bump to $1,300 a month in May compared to a year ago, according to real estate data firm Zillow.
Apartment vacancy rates in Pierce County in the second quarter of 2017 was 4.21 percent, up from 3.34 percent the year before, according to Apartment Insights, which studies apartment complexes with 50 or more units.
Thurston County has the lowest vacancy rate in the South Sound, with a 3.6 percent rate, the report says. That’s up from 3.31 percent a year ago. Newer buildings have few openings.
While vacancy rates are rising, that isn’t true for all apartments, said Raelene Rogers, a partner at McCament and Rogers LLC, a Gig Harbor consulting firm that specializes in urban development.
Some newer complexes are essentially full, she said.
“I have 10 different apartment managers saying they are definitely feeling the influx of people working in Seattle and living in Tacoma,” Rogers said.
Tacoma’s rental market could be a boon for investors.
Earlier this year, federal mortgage lender Freddie Mac listed Tacoma among the top 10 markets nationwide for apartment investments. At the time the report was released, in January, apartment vacancies were at 3.2 percent.
MORE APARTMENTS COMING
Apartment Insights says 4,004 apartments are under construction or have completed permitting in the three-county area, most in Pierce County. Another 4,251 are at earlier stages of permitting and review.
Among thousands of apartment units that will open in Pierce County in the coming years are units at The Grand on Broadway, 245 St. Helens Ave. It’s slated to open to its first residents by mid-September, said co-owner John Wise.
The building will have 139 units among five residential floors.
Wise said two other nearby buildings he partially owns, Metropolitan phase 1 and 2, are almost entirely fully leased, and The Grand is seeing a strong pre-lease.
And at Point Ruston along Tacoma’s waterfront, apartment occupancy has averaged about 98 percent, said Loren Cohen, managing director of the project.
At the trough of the recession, apartment vacancy rates were in the double digits — 13 to 14 percent, Rogers said.
“Before the economy tanked you had everybody out there buying anything they could buy,” she said. Those people lost their homes and moved into apartments.
As the economy recovered, people started moving back into homes. But ever since 2015, Rogers said, people from King County have flocked to Pierce County for its comparatively cheaper rents.
HIGHER INCOME REQUIRED
As in the past, many apartment managers are requiring proof of income before leasing to tenants, and residents must earn three times their rent.
Rents in newer buildings, which have luxury finishes and amenities, can cost north of $2,000 for a two-bedroom, two-bath unit. A family living there would need to earn $72,000 a year to even get in the door.
Tacoma’s median household income is $60,000 a year, Census data show. About 40 percent of Tacoma households earn less than $50,000 a year.
“That’s probably the fill-in from the Seattle market,” Rogers said of those who can afford that kind of apartment.
Tacoma has had double-digit rent increases for several months in a row compared to the prior year — at one point placing fourth in the nation for the highest percentage rent increase.
However, median rents here still are much lower than farther north. King County’s median rents neared $2,000 a month in May, Zillow data show.