Apartment Advisor Recap: Measuring Rental Performance

Apartment Advisor Recap - News from Dupre + Scott (www.duprescott.com)We always love it when a new Apartment Advisor comes out–the monthly digest from Dupre + Scott is chock-full of all the stats and data we rely on in the apartment industry. This month’s edition is all about measuring the performance of local properties. Since Dupre + Scott size up the rental market on a regular basis, you can utilize their data to see how your own property is doing against comparable rentals nearby. Here are some of the main factors to consider. Note that all data mentioned below is for buildings completed in or before 1999.

Operating Expenses

  • These vary due to many factors, including property tax rates and rent amounts.
  • If you’re looking for low operating expenses, head over to Pierce County–they’re averaging just over $4,600 per unit. Compare that with Eastside just over $5,700 on the Eastside!
  • Over the past 12 years, operating expenses for units built before 2000 have jumped over 40%. While actual costs vary, the increase remains fairly constant–compare Seattle at nearly 50% with Snohomish County at just 40%.

Investment Trends

  • Let’s talk sales. Currently, apartment sale prices are highest in Seattle, where the average is $160,000 per unit so far this year. Meanwhile, Pierce County units are selling at just $66,000.
  • Think Pierce County is a bargain? Keep price jumps in mind–the prices on these units climbed 83% over the past 12 years. Compare that with just a 74% climb in Seattle.

Rents: Trends, Inflation & Cap Rates

  • You might think Seattle is king when it comes to rents, but they’re actually highest on the Eastside right now–they’re averaging $1,250, compared with $1,090 in Seattle and $785 in Pierce County. Again, although rents in Pierce County look low, keep the climbing in mind. They went up 34% over the past 12 years, which makes the county second only to Seattle, where rents climbed 36%.
  • When comparing rents over time, don’t forget to factor inflation into the picture! Raw data, for instance, would have us thinking rents have shot up 800% since 1969, when in reality, they haven’t climbed much at all.
  • Finally, remember the important role cap rates play. As cap rates have fallen in recent years, buyers have been able to pay more for a set amount of income.


  • Last but not least, we’ve got development trends. In Seattle, apartment stock has climbed 40% in the past 12 years; meanwhile, Snohomish and South King counties actually didn’t add any net stock.
  • For  numbers on how development is affecting your building, check out the report–it’s got info on all of the new units in King, Pierce, and Snohomish counties.



Apartment Advisor Recap: The Investment Issue

It’s here, it’s here–the June issue of The Apartment Advisor, from Dupre + Scott! This issue was all about investments in the first five months of 2013; let’s see how it compares to 2012 and years past.Apartment Advisor RecapThese are just some of the most salient points from the new issue; as always, check out DupreScott.com for the comprehensive report.

Multifamily sales are currently up over this time last year–but projected sales for the year won’t outperform 2012.

In the first five months of 2012, $645 million in 5-unit or larger apartment buildings sold. Now skip ahead to the first five months of this year, when that number jumped to just under $900 million. When we annualize that number, it puts this year’s total sales activity at about $2.1 billion; in 2012, that number hit $2.7 billion. According to Dupre + Scott, “we don’t expect 2013 o outperform last year,” because 2012 sales were buoyed by capital gains tax changes.

Prices on these buildings are continuing their three-year rise.

So what are these 5-unit or larger buildings selling for, anyway? According to the Advisor, they’re currently averaging $141,389 per unit, up from $136,555 per unit averaged over 2012. That puts the price 3.5% up from last year’s average, which means prices are continuing on their three-year rising streak. Higher rents and lower mortgage rates are fueling the increase.

Cap rates have climbed above interest rates, signifying investors’ “concern about the potential for interest rates to climb in the future.”

Let’s back up a little–the relationship between cap rates and interest rates can be complex. According to Dupre + Scott, cap rates rise and drop due to many reasons, including supply and demand, changes in the cost of capital, and changes in buying pressure. Lately, cap rates have climbed much higher than interest rates. “Investors are taking advantage of today’s low rates, but [the difference] suggests they are concerned about the potential for interest rates to climb in the future.” Incidentally, this is a good place to note that assessed values, which fell over the past few years, are finally starting to catch up with price trends.

…Finally, some quick stats from the report

We’ve bulleted some statistics from the 5-19 unit sale findings below. For numbers on 20-99 and 100+ unit sales, as well as breakdowns by county, check out the latest Apartment Advisor.

Tri-County 5-19 Unit Sales

    • $91 million (in 74 sales) of these buildings have sold thus far this year; that’s up from $75 million (in 65 sales) at this time last year.
    • Average price is $134,023 per unit, up from $130,491 last year (a 2.7% jump).
    • Cap rates on these buildings have remained steady at 5.6%, up from their 4.6% low in 2007.
    • Averaged assessed value on these sales in 2013 is 88% of the sale price, down from 91% of the sale price in 2012.

Apartment Advisor Recap: The Units are Coming!

Apartment Advisor RecapThe April issue of Dupre + Scott‘s Apartment Advisor is out–and it’s got some very interesting numbers in it this time around. We know apartment construction has been strong lately; with numbers on everything from vacancy rates to concessions, the Apartment Advisor is the perfect source to check in with on how all of this construction is affecting the local market. Today, we’ll be checking in on five main factors that reflect the state of the rental market. To find out more, head over to DupreScott.com for the full report.

1. Market vacancy in the Puget Sound region is down to 3.8%.

3.8%–that’s the lowest it’s been since 2007, and it’s only been this low three times in the past 30 years. Now as you’ll recall, market vacancy excludes properties in lease-up and those undergoing renovation. When we include those units, we get the gross vacancy, which is currently at 5.2%.

The’s the Puget Sound region as a whole–so where does Seattle fit into all of this? Lots of construction within the city itself means there is a much larger divide between the market and gross vacancies–market vacancy is currently at just 2.9%, while gross vacancy is at 8.0%.

2. Rents have shot up 5.5% in the past year.

When we talk about rent amounts in Seattle today, it’s important to note the difference between rents for existing units, versus rents for units that have just been built–there’s a real and measurable difference between them. While rents have gone up 5.5% over the past twelve months, when we look just at the rent amounts in existing units, this increase is a bit less, at 3.7%.

This difference is particularly noteworthy in certain Seattle neighborhoods where more new units have been going up–take Queen Anne, for instance. Rents have risen 17.1% in that neighborhood; but if you factor out new units, the increase is 8.2%.

Finally, let’s talk about the rents of the future: Over the next six months, local apartment managers plan to increase rents by 2.8%–increasing rent at a rate they haven’t matched since 2008. Looking at per-capita income over the next five years (as per-capita income has been strongly tied to rent growth since 1980), the potential exists for rents to continue to rise strongly.

3. 34,000 units are planned to open over the next five years.

Here’s the part where we talk construction numbers–and these numbers are big. Dupre + Scott put the number of units under construction or just completed in the region at 15,000, with work to start on 5,000 more before July 1. If things go as planned, 2015 should keep pace with 2014. Out of all of this construction over the next five years, 89% of it is expected to be within King County alone.

Some investors worry that the gap between rent amounts for new and existing units, as referenced above, will lead to problems leasing all of this new construction once it’s complete. After all, twelve years ago, rent on new units was 1/3 higher than rent on existing units–now, it’s a whole 50% higher. But with low vacancy in existing units and the amenities, novelty and appeal available with new units, renters are still flocking to these new buildings.

4. Only 20% of surveyed properties are currently offering concessions–but this number will rise.

Speaking of filling new units, we should talk concessions. The number of landlords and property managers offering concessions dropped quickly during the rental renaissance of the past few years. Currently, concessions are offered in just 20% of the units surveyed by Dupre + Scott. But concessions help to fill units, and in buildings completed in 2012 and 2013, we’re seeing concessions offered with 2/3 of the units. As newly-completed units continue to open, we are likely to see an increase in concessions.

5. The percentage of tenants paying for water, sewer, garbage and parking is continuing to increase.

Finally, there are utilities (water, sewer, garbage) and parking to talk about. Taken together, water/sewer/garbage costs in Seattle average $55 to $90 per month; currently, around 2/3 of Seattle landlords are passing water and sewer costs along to tenants, with 50% also charging them for garbage. There has been a real sea change over the past few years with respect to these utilities–between 2008 and 2012, utilities paid by the renter rose 50%.

Then there’s parking. Last year, 60% of surveyed landlords included parking in the rent amount; this year, that number has dropped to 50%. Meanwhile, the number of parking spaces per unit is decreasing in new construction. Between 2000 and 2011, there were an average of 1.3 parking spaces per unit; but with units planned and in construction between 2013 and 2016, this drops to just 0.8 spaces per unit. Perhaps it’s time for a Smart car to go with that micro-unit?