Published February 2006

Report: Apartment market
ended 2005 showing
improved health

By Kimberly Hilden
SCBJ Assistant Editor

Snohomish County’s apartment market is leaving the doldrums behind, with the most recent vacancy rate pegged at 5.4 percent, according to an Apartment Insights survey released in January.

The report, which measures the vacancy rate for apartments with 50 or more units, is the first of its kind from Apartment Insights Washington LLC, a partnership formed in late 2004 between Seattle-based apartment research company Cain Inc. and Phoenix, Ariz.-based RealData Inc.

According to the report, the county’s apartment market ended 2005 strongest in the north and east, where vacancy rates stood at 3.4 percent, while the weakest market was in Mountlake Terrace, where the vacancy rate was 7.1 percent.

The lower vacancy rates in such cities as Arlington, Marysville and Monroe could be attributed to that area’s inventory of newer apartments leasing for less on a square-footage basis than in other areas of the county, said Tom Cain, a principal of Cain Inc.

The “average year built” for apartments in the north and east was 1992, with units renting for an average of 80 cents per square foot, according to the report. In comparison, the average year built for apartments in Mountlake Terrace was 1980, with units renting for an average of 90 cents per square foot.

“So they’re newer and bigger units that are more affordable,” Cain said of the units in north and east county.

Still, the county’s highest submarket vacancy rate in 2005 was below the countywide apartment vacancy rates of the recent past, when the market deteriorated following the Sept. 11, 2001, terrorist attacks and their ensuing economic fallout, which included layoffs at the Boeing Co.

When the rental market plummeted in 2002, Snohomish County was among the hardest hit, said Cain, who has more than a quarter-century of experience in tracking the Puget Sound’s apartment market.

In July 2001, vacancy rates countywide were 4.7 percent, according to a report from Woodinville-based Property Dynamics. A year later, in June 2002, vacancy rates had almost doubled to 9.2 percent.

“The fact that there has been virtually no new construction and Boeing’s recent success” has, in part, led to the declining vacancy rate for 2005, Cain said.

For year-end 2005, Cain’s Apartment Insights report also noted that affordable properties — those subject to rent restrictions under a tax-credit program — performed stronger than conventional properties, with the vacancy rate for Snohomish County at 4.7 percent.

Also performing strong were age-restricted communities and older Section 8 properties, both of which had a 1.5 percent vacancy rate at the end of 2005.

For the fourth quarter of last year, the monthly average gross rent for Snohomish County, excluding utility costs, was $783.

The highest rents were found in the area of Mill Creek south to Bothell. These apartments, with an average year built of 1993 — the newest in the county — had an average monthly rent of $914.

The lowest rents were found in the central Everett area, according to the report. These apartments, with a high concentration of older properties (the average year built pegged at 1973), had an average monthly rent of $613.

For 2006, Cain said that investors in apartments are looking forward to an even healthier market, with higher rents, fewer vacancies and fading concessions for renters.

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