A potent combination of investor confidence, continued job growth, and the excise transfer tax increase led to a record-setting year of apartment investment sales in the Puget Sound region according to the 2020 Sales Market Study released by Dylan Simon and Jerrid Anderson of Kidder Mathews.
A digital copy of the full 2020 Sales Market Study is available for download at DylanSimon.com/Research.
Seattle still shines in King County, but suburban markets are ramping up competition as market cycle matures and renter and investor demand shift out of the core
Seattle experienced a notable increase in institutional-sized apartment sales in 2019, particularly in the Downtown, First Hill, and South Lake Union neighborhoods, which accounted for 46% of sales volume in Urban King County. Across all neighborhoods, the average size of transactions was $22M – double that of 2018.
Throughout King County, 2019 sales metrics demonstrated continued investor confidence with nearly 10% growth overall in price per unit. High demand met by limited opportunities to buy in East King County generated the highest year-over-year increases in both price per unit and price per square foot among the county’s submarkets – 13.3% and 20.4%, respectively.
According to Simon, “Microsoft’s strong presence, Amazon’s plan to hire more than 15,000 people in Bellevue, and the rapidly approaching opening of East Link Extension light rail stations mean that the Eastside is not just rivaling Seattle as the Puget Sound’s top investment market but may soon surpass it.”
Snohomish, Pierce, and Kitsap counties all received tremendous attention from apartment investors in 2019, but each told a unique investment story
In Snohomish County, there is a clear differentiation between northern and southern markets, which sales trends reflect for the last 15 years.
“We do see investors going up to Arlington and Marysville now chasing yield, but from Everett north there have been fits and starts in pricing throughout this market cycle as rental rates can only grow so much,” Simon explains.
“However, the market dynamics of King County are directly pushing into South Snohomish, and metrics are more reflective of the urban core with clear trends of price per square foot increasing and cap rates compressing this market cycle.”
In Pierce and Kitsap counties, the upward velocity of sales dynamics in each market validated investor demand. Pricing in excess of $200,000 per unit and $200 per net rentable square foot, previously reserved for King County and South Snohomish, became the norm.
The health of the Puget Sound office market signals long-term stability in the face of any future turbulence
Approximately ten million square feet of office space is planned for the Seattle-Bellevue-Everett MSA, with just under seven million square feet under construction, 70-80% of which is pre-leased. As these offices are filled, over 250,000 direct and indirect jobs will ultimately be added to the local economy, creating additional demand for apartments in the region.
“Entering the 127th month of this expansion cycle, we have solid economic fundamentals for persistent growth and stability in both the short term and the long term throughout the Puget Sound region,” concludes Simon.
A digital copy of the full 2020 Sales Market Study is available for download at DylanSimon.com/Research. This market research covers 2019 sales of 5+ unit apartment buildings across the Puget Sound (King, Snohomish, Pierce, and Kitsap counties) and Portland Metro (Multnomah, Washington, Clackamas, and Clark counties), as well as 20+ unit buildings in the Willamette Valley (Salem and Eugene Metros).
About the Dylan Simon and Jerrid Anderson multifamily investment team
The multifamily investment team led by Dylan Simon and Jerrid Anderson of Kidder Mathews represents apartment investors and developers in the sale, purchase, and financing of apartment buildings and development land ranging from $1 million to more than $100 million in value. As leading apartment brokers, the team releases quarterly market research reports covering sales, development, employment, rent, vacancy, and lending to provide clients with relevant and actionable data to make profitable investment decisions. For more information, visit dylansimon.com.
About Kidder Mathews
Kidder Mathews is the largest independently owned commercial real estate firm on the West Coast, with 900 real estate professionals and staff in 22 offices in Washington, Oregon, California, Nevada, and Arizona. Kidder Mathews offers a complete range of brokerage, appraisal, property management, consulting, project & construction management, and debt & equity finance services for all property types. The firm performs $9.6 billion in transactions, manages over 70 million square feet of space, and conducts over 1,680 appraisals annually. For more information, visit kidder.com.