End-of-year research on Seattle’s microhousing apartment market has been released by Kidder Mathews’ multifamily investment team led by Dylan Simon and Jerrid Anderson. The 2021 Micro Report shows that, while some buildings have lagged, the market as a whole established resiliency in 2021.
As with all multifamily markets, microhousing was tested by the pandemic. However, both occupancy and rental rates are up. Average rent on micro units between 150 and 250 square feet is up 6.1% year-over-year, at $1,026, with 94% occupancy.
While only a handful of investors currently develop, own, and operate microhousing in the Puget Sound, thousands have watched the market boom with equal parts intrigue and skepticism.
“We sold the first microhousing investment in the region in 2016 and have spent our time selling, researching, and investing in it since,” said Anderson. “A lot of people look at it as just another investment type, however, we believe in the short- and long-term necessity of microhousing.”
Pod micros are back
In 2014, the city council passed legislation that killed off pod micro-housing development. The legislation was largely understood to make it impossible to build the kind of 8br/8ba townhouse pods we call “micros” because of complications with land use code, essentially starving micros of a land base where they could be built. However, in most instances, micros can now be permitted again as they were prior to 2014. There are a few new projects underway using this pod model, which can now be used in most urban villages in any zone where multi-family development is allowed in Seattle.
New energy code
The new 2018 Energy Code went into effect March 2021. While most architects and engineers are still going through their first round of projects designed under the new code, the profession is struggling with the difficulty and expense of complying with the new code. The effects are felt most acutely in the design of building systems for HVAC and hot water. The changes are adding a minimum of $10,000-$15,000 per unit to meet the requirements for balanced ventilation systems, no fossil fuels combustion, heat pump based hot water and HVAC systems, more renewable energy, and tighter envelopes. Developments with smaller units are most negatively affected by these changes as many of these extra costs are accrued on a per-unit basis, rather than based on square footage.
New hope in leadership
The 2021 mayoral election brought Bruce Harrell and Sara Nelson into office, both running as strong supporters of business with an interest in making Seattle an easier place to build housing. While time will tell if they move the ball forward, many developers are hopeful the pendulum may swing back to a more builder-friendly environment in Seattle.
This legislative & zoning update was compiled in collaboration with David Neiman of Neiman Taber Architects.
Download a digital copy of the full 2021 Micro Report at simonandersonteam.com/research.
About the Dylan Simon and Jerrid Anderson apartment brokerage team
The apartment brokerage team led by Dylan Simon and Jerrid Anderson of Kidder Mathews represents investors in the sale, purchase, and financing of apartment buildings and development land across the greater Seattle and Puget Sound region. The team of eight brokerage professionals specializes in sale and financing of apartment buildings and development land from $1 million to more than $100 million. For more information, visit simonandersonteam.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 64 million square feet of space, and conducts over 1,800 appraisals annually. For more information, visit kidder.com.