2023 Q3 Seattle & Puget Sound Apartment Market Dynamics

Posted In — Market Research | Trend Article

After sales volume stalled by 50% and as renter demand remains tepid, apartment investors crowd the sidelines waiting for an entrance point.

  • Although sales volume was up quarter-over-quarter, the first half of the year’s sales volume was down more than 50% from previous averages. As a result, it may finish the year off by more than 70%.
  • While sales pricing only shows a 70-basis-point increase compared to 2022, market data shows cap rate expansion in the range of 100 to 150 basis points since last year.
  • Rental rates across the region remain largely flat with some markets showing 2% to 3% growth compared to the last quarter, but still posted declines compared to 12 months ago.
  • Vacancy rates continue to tick upward as apartment owners attempt to balance occupancy with rental rates. Consequently, this demonstrates a marketplace that’s at an imbalance between supply and current demand.


On average, rents in Seattle are up 12% and vacancy is down 2.5% since the pandemic. So, what’s wrong?

Sales Insight
Anemic sales volume continues in the core of Seattle as buyers and sellers fight over the F-word “fairness”. Accordingly, we expect sales volume to increase steadily as investor expectations adjust to the market we are in. The bright spot in 2023 sales is the volume of offers on listings, we are averaging six offers per listing, nearly three times the average number of offers we received this time last year.

Rent & Vacancy Insight
It was hard to get excited about investing in Seattle when the sky fell in 2020, rents in 50+ unit Seattle apartment buildings dropped 11% overnight, while vacancy nearly doubled, from 6% in 2019 to 11.5% in 2020. Fast forward 30 months and average rents are up 6% from prior peaks with vacancy hovering at 6% again. With the supply of new apartments diminished by over 36% year-over-year, it’s not a question of whether Seattle will experience massive rent growth, it’s when, and how much.

North King

Rents have remained consistent in the last 90 days with sales picking up again: After a slow Q1 sales record, a handful of sales took place in Q2.

Sales Insight
North King bounced back with three sales this last quarter, tripling Q1’s results. What’s more, we finally saw an adjustment in cap rates (5.6%), accommodating for the rate increases we’ve seen throughout the year. And, with a substantial increase, price per square foot and price per unit were also affected. Now, with rates increasing faster than ever, there will be an adjustment period before we see an increase in sales and sellers’ expectations.

Rent & Vacancy Insight
Here, an increase in vacancies this last quarter — from 5.3% to 5.5% — was to be expected in the prime leasing months in Seattle as tenants change living accommodations. Furthermore, new units that will be delivered near light rail stations will continue to keep vacancy levels where they are (or increase) in the next couple of quarters.

East King

While sales volume is still lagging, rent and vacancy in East King continue their positive trajectory.

Sales Insight
Sales activity here is still slow to take off with only 10 sales so far this year. That said, total sales volume is picking up compared to last quarter with $228 million in sales in the last 90 days. Likewise, sales metrics also remain strong, averaging $400,000 per unit — just under $500 per square foot — and in the low 4% cap rate range compared to the last quarter. Accordingly, expect to see sales volume continue to pick up as we finish out the second half of the year, although it likely won’t best 2022’s performance.

Rent & Vacancy Insight
Rent metrics have continued to be strong this year averaging 2% to 3% growth each quarter, with the highest average rent in the region at an impressive $2,400 per unit. As expected, the summer months brought significant improvements in vacancy rates: Specifically, for buildings with 50+ units, they dropped 90 basis points in the last three months, which shows that new buildings are leasing up and stabilized buildings are continuing to push rents.

South King

The sales volume “king” of the Pacific Northwest is predicted to have its most anemic year of sales activity since the Great Financial Crisis.

Sales Insight
Sales volume in South King barely changed quarter-over-quarter. Even so, cap rates are rising quickly as the few sales reported in Q2 highlight the change in market conditions that was not yet reflected earlier in 2023.

Rent & Vacancy Insight
Notably, the modest increases in rental rates since Q1 — and 12 months ago — don’t make up for a sharp rise in vacancy; however, sustained sub-5% vacancy rates indicate that there’s room for owners to push rental rates.

Snohomish County

Snohomish slowed in sales by 50% this last quarter, but still saw a few large institutional buildings sell for a total of $185 million in volume.

Sales Insight
Snohomish saw four large sales that pushed the price per unit to nearly $300,000 per unit this past quarter. As a result, this increased the price per square foot to the highest we’ve ever seen in Snohomish County. Additionally, cap rates — just like the rest of the region — continue to creep into the 5% range as everyone adjusts to the rise in rates. Inevitably, this will settle back down in the coming quarters when we see more consistent sales.

Rent & Vacancy Insight
Rent rates continue to stay consistent with little growth this last quarter. That said, Q2 and Q3 are prime leasing seasons, and vacancies have increased throughout the region. Accordingly, with employers slowing on hiring and pushing for existing employees to come back to the office, expect to see more tenants move closer to their offices.

Pierce County

An uptick in apartment sales demonstrates investor appetite, and stability in both rental rates and cap rates provides further confidence in one of the region’s fastest-growing markets.

Sales Insight
While sales volume didn’t come close to previous years, sales pricing has yet to slide as far as other markets. Thus, investors still have faith in the growth slated for the region’s South End.

Rent & Vacancy Insight
Despite a sharp uptick in vacancy to 5.3%, rental rates here continue to grow nominally – thereby providing the affordability that Pierce County is known for. Yet, what this data doesn’t show is the increasing delinquency that’s eating away at owners’ bottom lines.

Kitsap County

Although Q2 brought stagnant sales metrics, rent and vacancy in the Kitsap market nevertheless show signs of improvement.

Sales Insight
There were no sales in Kitsap County in the last 90 days.

Rent & Vacancy Insight
Kitsap County, Bremerton specifically, experienced a massive increase in vacancy over the last 12 months as a result of a temporary decrease in military housing needs.  At this same time, several new buildings were delivered to the market, compounding the availability of apartment units. It’s great to see that vacancy is improving as new buildings lease up and military vacancies are filled. In fact, vacancy improved by an impressive 170 basis points during the last three months, while average rental rates grew by a healthy 3%. This is a big win for Kitsap considering its performance throughout the last several quarters. Going forward, expect this positive trend to continue throughout the summer and into the fall.


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 apartment investors, developers, and landowners in the sale, purchase, and financing of apartment buildings and development land across the entire State of Washington. The team of nine brokerage professionals specializes in the 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 independent commercial real estate firm on the West Coast, with 900 real estate professionals and staff in 20 offices in Washington, Oregon, California, Nevada, and Arizona. Kidder Mathews offers a complete range of brokerage, appraisal, asset services, consulting, project and construction management, and debt & equity finance services for all property types. The firm performs $10.9 billion in transactions, manages 62 million square feet of space, and conducts over 2,600 appraisals annually. For more information, visit kidder.com.

Read the full study at the link below.

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Simon | Anderson Multifamily Investments Team
Dylan Simon, Executive Vice President
Jerrid Anderson, Executive Vice President
Matt Laird, Vice President
Winslow Lee, Associate Vice President
Max Frame, Associate Vice President
JD Fuller, Associate
Jack Counihan, Associate | Financial Analyst

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