By Alice Yin
According to a monthly survey by Yardi, a Santa Barbara-based real estate software vendor, the city boasted an 8.7 percent rent growth as of June 2015. This statistic exceeds the 8 percent forecast rent growth the company predicted at the start of the year—a trend occurring across several other cities too.
“It was very surprising,” said the company’s associate director of analytics Steve Sorensen. “We were kind of expecting it to slow down but if anything it increased nationwide and in certain markets. … Seattle’s been in a long uptick of positive rent growth for several years now. Normally it’s more cyclical and rises and falls but this has been an extraordinarily long growth period for this cycle.”
The success of Seattle shows in its 3.4 percent year-over-year job growth, one of the highest among the nation. Clearly, the city is in a market of its own, Sorensen said. He said Seattle has a safe balance of sectors such as “government, aerospace, technology, everything from coffee to you know it.”
“It’s marching to the beat of its own drum and doesn’t really fall into the categories that certain markets are governed for,” Sorenson said. “Seattle has its own niche in its sense that it doesn’t belong to one sector.”
Sorenson compared some of the city’s charm to other West Coast names such as Portland or San Francisco. Calling it the “quality of life niche,” he said many residents, regardless of employment prospect, tend to stay there because they are lifestyle cities.
The city too seems to be aware of this phenomenon and has been marketing to that, Sorenson said. He said Seattle is witnessing “aggressive building” to make it more livable.
“Along with livability, the culture itself supports innovation and individuals going off on their own so it’s not your normal go to job, work and go home. There is an entrepreneurial spirit and the culture accepts and supports those types of things.”
Seattle’s ability to be an incubator for startups can be observed through its real estate trends, as well. In the multifamily industry, properties are frequently marketed with sought-after amenities such as high-speed Internet for tech workers, walkability, friendly neighborhoods and even bike storage.
As a whole, Seattle is now seeing a lot for “doubling” occurring in the average renter. Tenants are rooming together or moving back in with parents. Either way, millennials new to the market are not buying single-family houses the way they have in the past, pushing rent up still further.
Sorenson has also observed the private real estate industry building more towards luxury and high-end, he said, pushing lifestyle rent growth higher than necessity rent growthers. Although Seattle is still leading the way in providing low-income housing than any other city, he said, the low-income population still has a need to be met.
The pattern of city-dwellers finally packing up to the suburbs is also present in Seattle, Sorenson said. Rental increase in the neighboring Tacoma is actually higher than Seattle, as it is not moving as fast to add new property but is still seeing an influx of movers looking for a cheaper alternative. In general, Sorenson agrees that Seattle, like other large markets, is starting to see a spillover into nearby towns.
For the future, even the upcoming second half of the year, Sorenson is not sure what the market will bring. He predicts this upsurge will eat too far into other areas such as utilities, food or car payments. Eventually, something will push the rents too high and cause them to slide back down, he said.
“Rents have never been this high before and are begging the question of affordability. How far can the rents continue to go?”