For this study, we traced apartment development deliveries back 10 years and analyzed three distinct phases of the current development pipeline, as outlined below. Our research and data cover the quad-county region (King, Snohomish, Pierce, and Kitsap counties), encompassing more than 6,400 square miles, 150,000+ planned apartment units, and nearly 800 individual apartment developments.
Pipeline Definitions
Under Construction
Developments labeled “Under Construction” have broken ground. Anticipated delivery is within the next 36 months for Type I projects or the next 24 months for Type III and Type V projects.
Plan Approved
These units have entitlements from their respective cities and could break ground at any time. Given current market dynamics, it is important to note projects that might be on hold. Specifically, concerns regarding the economy, rising construction costs, and tighter lending restrictions have led some developers to rethink permitted projects. And, while some permitted sites will trade hands and construction will commence, many others will be held by developers until a later date.
In Review
Projects labeled “In Review” are currently awaiting city approvals and are in the speculative, planning, or drawing stages, representing the very early phases of development. In Seattle, the entitlement process can take more than two years, meaning that many projects in this category are three or more years away from completion.
Apartment Pipeline Snapshot
Construction Pipeline Continues to Shrink
After years of significant construction – fueled, in large part, by low interest rates – multifamily deliveries continued to retreat in 2023 (6,416 units) from their all-time high of 10,266 in 2022. Thus far in 2024, Puget Sound has seen 2,294 new multifamily units completed, which has decreased the construction pipeline to just under 28,629, or 8% of existing inventory.
Rising Costs Call Development Returns Into Question
The shrinking construction pipeline comes as a result of rising costs, as well as increasingly weakening projected returns, which then cause developers to pause or cancel projects. Although market saturation and weakening fundamentals have been factors contributing to the slowdown in construction in other markets, this is less so the case in Puget Sound; here, the primary culprits are rising construction and financing costs.
It’s worth mentioning that the proportion of “permitted” projects has increased year-over-year. This pipeline – in combination with projects “in review” – represents a potential 36% increase in inventory upon completion. However, it remains to be seen when or even if many of these projects will in fact be delivered. So, for the foreseeable future at least, the threat of new supply appears to be subsiding.
Seattle Development Overview
Easy-money pandemic building winds down as uncertainty surrounds developer confidence
The Seattle market has experienced a significant wave of multifamily development since the pandemic. Notably, 10% of existing stock has been delivered since 2021. That said, the construction pipeline has also shrunk considerably throughout the last year: Now, it totals 9,586 units, which is down 35% from 14,758 units at the same time last year.
Even so, the under-construction pipeline still represents a meaningful 10% of total inventory, the majority of which should be delivered throughout the remainder of 2024 and into 2025. On a percentage basis, the submarkets of South Seattle and Belltown/Downtown/Pioneer Square are expected to see the largest relative increases in supply. Here, units under construction as a percentage of existing stock are at 31% and 24%, respectively.
While development plans approved have surged 49% year-over-year, it’s unclear how quick developers will be to put more shovels in the ground. In any case, the Seattle market is experiencing the same challenges as many markets around the U.S., with rising construction and financing costs suggesting that many previously underwritten deals no longer pencil.
Suburban King Development Overview
With 2,862 deliveries since the beginning of 2023, the construction pipeline in Suburban King has declined 14% year-over-year from 15,751 units to 13,602. Looking forward, an additional 13,602 units are currently under construction; when delivered, they will increase inventory by 11%. Plus, many of these new developments are taking an increasing focus on transit-oriented, affordable housing projects by focusing on areas near future light rail stations, particularly in the Shoreline submarket. Below are two notable examples:
Shae Shoreline TOD. This is a major mixed-use project under development from Shea Properties that’s expected to reach completion in 2026 and will deliver 550 units to the community. The property is strategically located near the Shoreline South/148th Street Light Rail Station and offers easy access to Seattle and other surrounding areas via the light rail system.
192 Shoreline. This project by TWG is expected to reach completion this year and will deliver 250 affordable housing units. The asset will benefit from close access to the Shoreline North/185th Street light rail station (part of the Sound Transit Lynnwood Link Extension), making it easy for residents to commute to Seattle and other nearby areas.
Snohomish Development Overview
The Snohomish construction pipeline is relatively smaller as compared to other Puget Sound regions, totaling 1,766 units or 4% of total inventory. Notably, Snohomish multifamily development tends to reflect a mix of urban infill and mixed-use projects, many of which also focus on delivering affordable housing solutions to local residents. Below, we highlight two significant projects currently in the construction pipeline:
Four Corners Apartments. This project is the largest currently under construction in Snohomish located at 8102 Evergreen Way in Everett. The project includes the transformation of a former Kmart into a 430-unit affordable housing complex.
Ember Apartments. This is the second-largest project and is located at 19888 40th Ave. W. in Lynnwood. Ember Apartments features 361 units spread across two eight-story buildings with a mix of residential and retail spaces. This development offers modern amenities, such as a Top Golf Swing Suite, a central courtyard, and proximity to the new Lynnwood Light Rail Station.
Pierce Development Overview
Pierce County saw deliveries totaling 1,842 units since the beginning of 2023, which is equal to about 3% of total inventory. With that, the construction pipeline shrunk from 4,432 units last year to 3,208 units currently. The majority of the existing construction pipeline should be delivered within the next one to two years.
It’s worth noting here that the greater relative affordability in Pierce County has been key in attracting new residents and developers to the region. In fact, rental rates tend to be 20% to 25% lower than in Seattle and 10% lower than in South King, on average.
Kitsap Development Overview
On a relative basis, Kitsap has seen the largest number of multifamily deliveries since the beginning of 2023 with 11,024 units brought to market representing 7.3% of total inventory. Nevertheless, virtually no new projects have entered the construction pipeline since last year, and the current construction pipeline (467 units spread across four developments) now represents just 4% of the total inventory. So, as these projects reach completion in the coming quarters, existing landlords will likely face little near-term threat of additional supply.
While the remaining development pipeline (such as plans approved and projects in review) total 3,411 units (or 31% of existing inventory), market sentiment and rising costs indicate that it may be some time before many of these projects break ground.
About the Team
The apartment brokerage team led by Dylan Simon and Jerrid Anderson of Kidder Mathews represents apartment investors, developers, and landowners in the sale and purchase of apartment buildings and development land across the entire State of Washington. The team of 10 brokerage professionals specializes in the sale and purchasing 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 over 900 professionals in 19 offices across Washington, Oregon, California, Idaho, Nevada, and Arizona. We offer a complete range of brokerage, appraisal, asset services, consulting, and debt & equity finance services for all property types. Kidder Mathews averages over $10 billion in transaction volume, manages more than 55 million square feet of space, and conducts 2,600 appraisal, consulting, and cost segregation assignments annually. For more information, visit kidder.com.
Read the full study at the link below.
Contact
Simon | Anderson Multifamily Investments Team
Dylan Simon, Executive Vice President
Jerrid Anderson, Executive Vice President
Matt Laird, First Vice President
Max Frame, Vice President, Eastern Washington Specialist
Winslow Lee, Vice President
JD Fuller, Associate