Demand for multifamily housing nationwide remains extremely high, but less so at this moment within urban Seattle. However, this tempered demand can also have an upside: Where there is uncertainty there is also opportunity, making Seattle ripe for renewed real estate investment.
The National Multifamily Housing Conference was held June 8-10 in San Diego. The sentiment among our contemporaries and presenters suggests—on the national level—there are more investors than opportunities available. The market is highly competitive, and investors are accepting lower yields in order to win competitive listings. Institutional deals are trading in the 3%-cap range, especially in Sun Belt markets such as Phoenix, Dallas and Miami where things are hot, both literally and figuratively.
Single-family “build to rent” was another popular topic at the conference, given the increase in demand from the suburbs paired with the increase in rent costs. When it comes to the greater Puget Sound Region, there is currently more enthusiasm with regards to the outlying suburban areas than within the Seattle urban core. Our friends at Colliers described one group’s geographic interest in the Puget Sound region as the shape of a question mark – targeting properties from Shoreline around the top of Lake Washington, around the Eastside down to Renton and South along I-5 running all the way to Tacoma. At Juniper, we are observing similar regional investment interest.
This suburban-leaning trend aligns with the ongoing construction and expansion of light rail, which is fortifying alternative transit options for the region and bringing opportunity. East King County leads suburban markets when it comes multifamily development demand. However, light rail’s “web” is spinning in all directions: north, south, and east. Even westward, to Bremerton and Southworth (which now both offer quick-crossing, passenger-only ferries to downtown Seattle) making Kitsap County an expanding market for multi-family investment. In our view, between rising rents and more transit infrastructure coming online, the region-wide potential of transient-oriented development (TOD) will continue to be significant moving forward.
Despite molasses-like construction starts in the county, if you look at units in review of apartment applications submitted—but not yet issued—that number is soaring, and amounts to half of ALL the apartment inventory in King County’s urban neighborhoods!
While urban-located, small-unit-sized developments may currently be experiencing a slowdown, there are still some Seattle urban markets with high entrance barriers (such as Queen Anne and Green Lake) that remain largely unaffected. We see pockets of opportunity. The City Council’s extension of the eviction moratorium along with some questionable bills the City recently introduced may give developers pause, but there is also a chance to seize a deal while others are looking elsewhere. We’re happy to speak with you if you’re looking for capital.
Thanks to our friends Tim, Dan, Matt and Sam at Colliers for starting this conversation. We’re optimistic as 2021 multifamily investing ramps up again.
If you’re seeking quality commercial real estate investments throughout the Pacific Northwest, we’re here to help. Juniper Capital provides private real estate financing, including hard money loans for commercial, construction, multifamily residential opportunities and more. If you would like more information on this topic, call us today.