Despite 2020 defined by a global health crisis and market challenges, apartment sales in the Puget Sound region ended the year with cap rates not far-off previous years, according to the 2021 Apartment Sales Market Study released by Dylan Simon and Jerrid Anderson of Kidder Mathews.
A digital copy of the full 2021 Apartment Sales Market Study is available for download at DylanSimon.com/Research.
Seattle and its urban neighborhoods retain a top spot as the most active sales markets, with 77 sales equating to nearly 35% of the region’s total transaction volume
While the number of apartment transactions in urban markets plummeted to Great Recession levels, these markets were still the most actively traded in 2020. Pricing remained strong with cap rates largely unaffected by market turbulence.
The last time these markets experienced this significant decline in transaction volume, cap rates rose 110 basis points, reducing the value of apartments in our region by roughly 20% overnight. However, in 2020, Urban King County apartment sales averaged a 4.3% cap rate, the same as 2019, keeping values steady despite the COVID-19 pandemic.
Reduced supply of available apartment investments resulted in strong demand from investors looking to take advantage of record-low interest rates. Although short-term fundamentals (rental rates, occupancy) weakened, sellers received fair pricing for well operated properties.
Jerrid Anderson notes, “If you are thinking of selling in the next 2-3 years, it’s hard to argue there is a better time than now. Limited apartments on the market with pent-up investor demand make 2021 a good year to sell if you plan to sell in the next several years.”
Snohomish, Pierce, and Kitsap counties all outperformed urban markets in pricing, yet the region’s south-end market performed best with year-over-year price appreciation
Sales volume in Snohomish County remains choppy year-over-year, yet sales pricing continued to remain strong in 2020, evidenced by both increasing sales pricing on a per-square-foot basis and low cap rates – evidencing continued investor confidence.
Pierce County continues banner years for the volume of sales transactions, with 2020 surpassing all previous years. Pricing remained strong in 2020, with the market maintaining sales volume increases in nearly every year since 2010.
Often Kitsap County received less attention than other regional markets, yet in 2020 it continued a trend of value-growth, marking the second year in a row of the highest appreciation of asset value of all markets in the region. Sales volume remains low, yet continued value increases prove investor demand and a bright future for Kitsap County.
Apartment sales in Puget Sound slowed, yet healthy Q4 sales and continued low cap rates demonstrate both investor confidence and momentum
A review of historical sales volume, velocity, and pricing clearly demonstrates slowed sales volume in the first three quarters of 2020, yet consistent investor demand is evidenced by only nominal changes in cap rates over the last six years and a very strong close to the year.
“Economic fundamentals in the Puget Sound region remained strong in 2020 – with the region’s top employers growing in size and market capitalization. It won’t be long before workers return to the office, investor confidence returns in force, and we see apartment pricing begin to accelerate across the region,” concludes Simon.
A digital copy of the full 2021 Sales Market Study is available for download at DylanSimon.com/Research. This market research analyzes 277 apartment transactions in 2020, covering sales of 5+ unit apartment buildings across the Puget Sound (King, Snohomish, Pierce, and Kitsap counties), and tracks apartment sales trends for the last 15 years in the region.
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, 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 21 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 $8 billion in transactions, manages over 70 million square feet of space, and conducts over 1,800 appraisals annually. For more information, visit kidder.com.