Webinar Recap: The Rebirth of Multifamily in Seattle – Again
Demand for housing has never been higher in metro Seattle, making this the perfect time to discuss challenges and opportunities for multifamily investors.
Tim McKay, senior vice president of Colliers, joined us for our July webinar to review issues of interest to multifamily investors, including:
Threats to Seattle and King County
Why now is the best time to buy apartments in the city
Financial factors holding or pushing values
Challenges for Seattle-Area Multifamily Investors
Though we're coming out of the pandemic, we have a long way to go for landlords to get back to normal. Property owners are playing catch-up and will be for another 12 months or so.
Affordability Requirements: Because of Seattle and King County’s unique footprint, there isn’t a lot of land available in the first place. And as the area continues to see in-migration, demand is high and pushing housing costs higher. All this has had an enormous impact on affordability. City and county governments have instituted mandated housing affordability as opposed to incentivizing owners to keep units affordable themselves.
Rent Suppression: Rent increases were also stalled. When you say nobody needs to pay rent, the landlord takes the brunt of that. As the pandemic rolls on, landlords are hoping for a means-related plan so if tenants can pay rent, they should, to help property owners pay for repairs and cover taxes, insurance and utilities.
Property Inspections & Evictions: The city forces landlords to have their property inspected by the Seattle Department of Construction & Inspections regularly and at their own expense. Without a standardized real checklist, it’s hard to know what’s required to pass. The SDCI also oversees Just Cause Evictions, which are getting closer scrutiny in light of the various COVID-related eviction moratoria in place.
Permitting & Approvals: Backlogs continue to hamstring these processes. If you want to break ground on an apartment, start permitting now because it could take close to two years to break ground because of delays.
Buying Multifamily Real Estate in Seattle & King County
Now is a good time to buy in the region:
Unmet Demand: A report earlier this year noted that underserved demand for housing in Washington State is 250,000 units over the last decade. With most of the population increase in Seattle and King County, there is a clear need to build more.
Improving Trendlines: Interest from institutional capital remains high across the region, thanks to increasing in-migration, unmet demand at all price points and infrastructure and transportation investment.
Financial Factors:
Rates: Interest rates got a reprieve from the Fed, adding fuel to the ongoing uptick in deal velocity. Falling cap rates are also attractive. For example, you can purchase a four-cap, put that on 2.5% to 3%. The seller doesn’t lose value and the buyer is getting a good deal.
Debt-driven demand: New financing options are available, especially for projects that might be a little rough around the edges. Debt funds looking for value-add opportunities to, say, put bridge debt on a property that gets three years of IO at 3.5% which can then be sold or rolled into perm debt.
Despite the challenges of being a multifamily property owner in Seattle and King County, real assets remain attractive, especially as whispers about inflation get louder. The best assets to own during periods of high inflation are real assets. In these periods, we typically see good rent growth as fewer products are built because of higher product costs.
Get more details by watching the full session below.
This information doesn’t constitute financial or legal advice. Always check with an attorney, real estate investment or financial expert before making decisions.
As always, reach out if you have any questions.
