Rental Market SLU/Denny Triangle/Uptown - still soft?

[CrazyDonkey]

Originally Posted by fnh

"Rents, which also dipped last year, have fully rebounded (not sure I’d call this part good news). In the most recent quarter, asking rents hit a high of $2,221 in greater downtown. That just edges out the previous high of $2,207 from the first quarter of 2020. Rent concessions are also down significantly from last year."

Downtown Seattle population rebounds, hits new high in 2021
https://www.seattletimes.com/seattle...-high-in-2021/

That's with 5,000 units, mostly high-rise "luxury" units (with gyms, water/mountain views, roof-top patios, parking, and other amenities), being added since 2019. The biggest rent drops look to be for micro-apartments of 350sf or less, many of which were added in N. Seattle. Amazon and Microsoft still WFM, and Boeing with its own troubles, it is hardly surprising that "worker" units, as opposed to "luxury" units, there might be in supply, rather than in demand.

[jabogitlu]

Wow. I guess we're back?

Regarding SEDUs (micro units) - I recently reviewed an appraisal of land that had also been appraised in 2019. Highest and best use switched from SEDU development to townhome development due to softening of the market for the former land use type. This was even after several hundred thousand dollars in entitlement costs as the site had a MUP for SEDU construction.

So, yep, seems like there is some moving around of the preferred property types, at least for now.

[CrazyDonkey]

Originally Posted by jabogitlu

That is pretty much always true. Ignoring intangible costs like moving costs, utility hookup fees if any, and the social costs of moving if any, consistently moving to a newly developed building every 1-2 years will typically provide you with the most bang for your buck in terms of rental rates and concessions. (This doesn't really hold up if your preference is to live in fully depreciated buildings like a 1960s quadplex, of course.)

Otherwise - Yes, rents are down in a lot of areas of the city. They have rebounded since the lows observed around 4Q20-1Q21. The dip in rate is slow to push hard against the highs seen in 2019 and 1Q21 due to the factors you mentioned but also due to the huge pipeline of multifamily units that have finally been coming onboard. We are lucky as a region to have a much better planning and permitting ecosystem than some parts of the country (California). There are issues like the design review boards and citizen abuse of the GMA/EIS (NIMBYism), but overall we are doing a fairly decent job of building housing.

Plus, we don't know what the longer-term trends will be, for WFH, Amazon site development/acquisition, and Boeing employment. Why shouldn't many corporations, once they've discovered they can manage it, pivot from paying for expensive Downtown-office space to employees willingly paying for home-office space? My nephew used to rent in Ballard and commute to Bellevue, but now is buying a house and works-from-home doing the same job, in Las Vegas. Zoning-loosening and a flood of projected affordable housing developments could end up overshooting the mark. So, savings gained now, by making the leap, could be permanent.

While this might not be good for REITs that have heavily invested in Northend apartment projects, it could be good for Seattle's renters.

[jabogitlu]

That is a big question mark for the local area but my own opinion is that it will show up in the spec office market before (or if ever) the apartment market. The pandemic won't last forever and people enjoy living in the PNW. Longer term, the PNW is poised to absorb climate refugees from the Southwest and South. Anecdotally, a lot of folks (including myself) now work from home permanently but still live in the city in condos and apartments.

However I doubt we will see another Rainier Square (Tower II) or 2+U style development for years. Big tech has definitely moved onto the Eastside and our other major industries (Boeing, Government) can't anchor additional office space downtown.

[CrazyDonkey]

Originally Posted by jabogitlu

That is a big question mark for the local area but my own opinion is that it will show up in the spec office market before (or if ever) the apartment market. The pandemic won't last forever and people enjoy living in the PNW. Longer term, the PNW is poised to absorb climate refugees from the Southwest and South. Anecdotally, a lot of folks (including myself) now work from home permanently but still live in the city in condos and apartments.

However I doubt we will see another Rainier Square (Tower II) or 2+U style development for years. Big tech has definitely moved onto the Eastside and our other major industries (Boeing, Government) can't anchor additional office space downtown.

One of the hottest real estate markets in the nation now is Aberdeen and Grays Harbor, due to investments made to connect it via fiber to the Internet backbone. Even so, real estate values there, although historically high, are still less than half of Seattle's. Companies may not be relocating there much, but WFH workers are. Such workers, however, are running into rental crunches outside Seattle. My nephew couldn't afford to buy a house in Seattle, but could in Las Vegas, despite a historically "hot" real estate market there.

I think people being able to choose to live in the City without being priced out is a positive. Seattle now has 575 rental results in Zillow, many with multiple available units, for $1,500 or less (Grays Harbor has 2). If WFM, you may not be tied to a particular bus-line (the #40 or #8 for Amazon, for instance). Maybe you can afford to live in Ballard, even though your job is in Redmond, because so many others can choose not to, without having to pay a fortune for a postage-stamp apartment.