New construction projects that reached completion in the last year are leasing up well: Occupancy rates across Puget Sound held up this quarter, despite the historic levels of new development that took place both during and shortly after the pandemic, which highlights the resilient demand in the region.
Notably, investors still showed signs of caution in Q1 of this year with sales still slow to return to the market. Here, confidence appears to be strongest in Seattle, where the downtown market benefitted from a resurgence that was driven, in part, by return-to-office mandates. And, although there were more transactions this quarter as compared to last, deal sizes tended to be smaller in Q1. As a result, the total dollar volume was down 45% quarter-over-quarter.
Meanwhile, the average vacancy rate ticked up slightly this quarter by 10 basis points (bps) to 7.6%. Even as most regions saw vacancy decline or remain unchanged—most significantly Kitsap, where positive net absorption led to a 40-bps sequential drop—some regions saw an increase in slack as the recent glut of new construction continued to hit the market.
Lastly, pricing held steady this quarter with cap rates unchanged quarter-over-quarter. Furthermore, the 10-year treasury yield trending down this last quarter will likely relieve any pressure on further cap rate expansion. Even so, prices showed some improvement on both a price-per-unit and price-per-square-foot basis. The latter typically tends to fluctuate more given the varying unit mix of each property, but not enough to infer significance.
Seattle
Seattle’s apartment market is back in the spotlight. With the return-to-office wave boosting downtown, investors aren’t just hopeful—they’re confident. The 30 bps cap rate compression signals a clear bet: Seattle is primed for sustained growth, and smart money knows it.
- Sales Insight
Seattle investors stepped back in with conviction in Q1, closing 29 deals totaling $283 million. While still below historical norms, this activity marks a clear shift in sentiment. Investors are no longer sitting on the sidelines—they’re betting on a resilient downtown and the momentum of rising rental rates to drive sustained market gains. - Rent/Vacancy Insight
Fueled by the return to office, downtown Seattle’s resurgence is driving real results. Rental rates climbed 2% year-over-year, and despite a 10 bps annual vacancy uptick, strong recent absorption pushed vacancy down quarter-over-quarter, and that’s after Seattle delivered over 5,351 units to the 14 core neighborhoods we track in 2024. The fundamentals are firming—and the momentum is building, all as we welcome rent control to our state.
North King
Coming off a strong year of multifamily development completions in 2024, vacancy in North King spiked at the beginning of this year as rental rates continued to grow moderately. This led to investor caution and another quiet quarter on the transaction front.
- Sales Insight
Building sales are slow to return to North King with only three transactions recorded during the first quarter of this year. During these more uncertain times, investors may be hesitant to invest in a market with rising vacancy. - Rent/Vacancy Insight
In Q1, vacancy was up 120 bps quarter-over-quarter to reach 10.8%. Among Puget Sound markets, North King has the highest vacancy rate. Nevertheless, rents held steady both on a sequential and year-over-year basis.
East King
Investors have yet to return to East King by any reasonable measure as only one transaction took place in Q1. However, it’s worth noting that fundamentals held up impressively: Strong rent growth and stable vacancy is the headline this quarter.
- Sales Insight
Only one transaction—valued at $147 million—occurred in East King this quarter. As such, pricing information should be taken with a grain of salt. That said, because confidence is likely to continue to return to the market throughout 2025, we expect increased sales activity to follow. - Rent/Vacancy Insight
Rental rates were up rather sharply in East King this quarter—2% per unit on a quarter-over-quarter basis – making it the Puget Sound market with the strongest rent growth in Q1 of this year. During the same period, vacancy increased modestly after rising 10 bps to 6.9%.
South King
The average cap rate on transactions recorded in Q1 was up 55 bps quarter-over-quarter. Yet, sales are primarily featuring smaller properties (a $6.3 million sales price, on average), which tend to trade at higher cap rates. Accordingly, this may account for the majority of the apparent decompression.
- Sales Insight
Transactions increased modestly this quarter, totaling 10 building sales. However, these trades generally involved smaller properties, on average, as total sales volume declined 49% from Q4 2024. In fact, sales volume was also down on a year-over-year basis. However, this was largely due to a base-year effect of higher-than-normal volumes in Q1 of last year. - Rent/Vacancy Insight
Vacancy held steady and, at 6.1%, is the lowest vacancy rate among Puget Sound submarkets. This stable environment allowed for rental rates to continue their steady climb—up 1% quarter-over-quarter and largely flat (0.4%) year-over-year.
Snohomish
Investors slowly waded back into the waters in Snohomish this quarter with investment volumes largely constant as compared to Q4 2024. While transactions were few, those that did take place indicated that pricing was mostly in line with that of the previous quarter.
- Sales Insight
A slow, but steady return of investment activity characterized Q1 of this year. Unlike much of the rest of Puget Sound this quarter, sales volumes rose modestly (2% in dollar terms) as compared to last quarter. And, with cap rates and prices per unit essentially flat quarter-over-quarter, there was no indication of any material change to pricing. - Rent/Vacancy Insight
While vacancy increased 20 bps from last quarter to reach 7.1%, the pace of this increase decelerated as the majority of the new construction has now been completed and is leasing up. Thus, nominal rent growth continued during Q1 and was up about 1% on both a quarter-over-quarter and year-over-year basis.
Pierce
Pierce County continued to post moderate, but healthy rent growth and minimal vacancy rate volatility, despite the period of heavy construction that was just completed. This stability tends to be valued by investors in the multifamily space
- Sales Insight
Much like across the majority of Puget Sound, smaller trades dominated Q1 2025, leading to a relatively consistent pattern of increased transaction activity with lower overall sales volumes. So, at 5.8% this quarter, Pierce’s average cap rate is on the higher end of the Puget Sound submarkets, notwithstanding the healthy population growth seen of late in cities like Tacoma. - Rent/Vacancy Insight
Both rental rates and vacancy exhibited little volatility throughout the last year with rents continuing to climb steadily and vacancy barely fluctuating 20 bps. More precisely, in Q1 of this year, average rents were up 2% year-over-year in Pierce with average vacancy at 7.4%.
Kitsap
Rent growth in Kitsap was healthy this quarter, particularly on a year-over-year basis, which saw rents grow 4% compared to Q1 2024. Moreover, new supply continued to see absorption, thereby reflecting continued demand for a more affordable, quieter living environment with convenient access to nearby Seattle.
- Sales Insight
With one transaction during the quarter, there’s little to report on the sales front in Kitsap County. That said, what we do know is that it was a small transaction (around $2 million) with a $105,000 price per unit. Stay tuned for more insight as sales return throughout 2025. - Rent/Vacancy Insight
Heavy development activity in 2024 led to a spike in vacancy, which increased more than 300 bps from Q1 to Q4 last year. Now, this new supply is leasing up well, and vacancy rates are beginning to normalize. With that, the average vacancy rate in Kitsap was 9.4% this quarter, down 40 bps quarter-over-quarter.
About the Simon | Anderson Multifamily 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 13 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 fully independent commercial real estate firm in the Western U.S., 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 $9 billion in transaction volume, manages more than 58 million square feet of space, and conducts 2,400 appraisal, consulting, and cost segregation assignments annually. For more information, visit kidder.com.
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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
Elijah Piper, Vice President
JD Fuller, Associate
Jack Shephard, Associate
Tony Herrmann, Associate