Seattle Could Face A Multifamily Slowdown
Seattle has been in a building boom and that surge of construction has included multifamily this year, but there is some expectation of a slowdown in 2018.
It is growing more difficult to underwrite multifamily projects in Seattle as construction costs are growing at a faster rate than the Class-A rental rate, LMC Division President Brad Reisinger said.
"We believe this will begin to constrain new starts in 2018 until costs stabilize or begin to come down," he said.
By midyear 2017, 7,526 multifamily units were delivered in Seattle, compared with 6,616 in all of 2016, according to Colliers' Seattle Multifamily Team's midyear review of the market. Nearly 36,000 units are planned from 2017 to 2020.
Employment has grown, outpacing the nation, and companies continue to grab up office space. The basic economics supporting office growth also support the multifamily market in Seattle, according to the Colliers report. Demand drives up rental rates while keeping vacancy rates low.
Seattle carries the benefit of having a well-defined process for getting projects approved, Reisinger said. But the city does have its challenges, primarily affordability.
The city has worked to address the affordability issue through its Housing Affordability and Livability Agenda, which has a goal of achieving 50,000 affordable units in the city in the next decade through multiple approaches. It includes a mandatory housing affordability requirement for new development, the use of public property for affordable housing and zoning changes.
Reisinger said there are other solutions beyond HALA that could address affordability by encouraging new development.
"Some cities are curtailing delivery of new product in the name of affordability, which only exacerbates the problem," he said.
Another challenge for Seattle will be making downtown a place millennials can stay as they start having children, primarily by providing access to public schools downtown and safe playgrounds for young children, he said.
Hear more from Reisinger and other experts at our Seattle Multifamily event Nov. 2 at The Westin Seattle.