It feels great to be back in front of people! For the first time in two years, our team hosted its Multifamily Investor Forum as an in-person event this past Tuesday, with about 100 in attendance.

Over the course of the last year, we’ve streamlined our data from feedback we’ve received, releasing quarterly market reports with both 90-day and twelve-month trended data. Covering Snohomish, King, Pierce and Kitsap counties, the research presented segments both each of the counties as well as suburban versus core markets in the region.

At Tuesday’s forum, Executive Vice President Dylan Simon provided an analysis of the current market, including:

  • Regional Overview (of the four-county area)
  • Submarket Insights
  • Near-Term Forecast
  • Long-Term Forecast

Regional Overview

Rental Rates

In Western Washington this past quarter, historical rents are already back at pre-Covid levels, even ahead of our team’s original predication. The suburbs provided a major boost for rental growth throughout the region, as demographics shifted throughout the Covid pandemic. Rental rates in those suburban markets helped anchor overall rates, however, the urban core is back on track with its own rent numbers. All counties are now seeing pre-Covid rental rates. Vacancy is down to 4.4%, a decrease of 2.6% from a year ago! The bounce-back has been quick and significant, showing gains even over the market declines seen throughout the pandemic.

Building Income Velocity

Building income velocity is a metric we monitor around the region which compares the sales price per unit, price per square foot, and the cap rate for transactions each quarter within each county. It’s a snapshot of a building’s income in the form of rent and the occupancy of the building. These figures are able to provide us with a richer understanding of where investors are looking and the market spots that are hot or not over both a 90-day and 12-month timeframe.

Historic Sales Volume

Multifamily building sales since 2015 have averaged above $4 billion a year in volume. This year-to-date transaction volume has already reached $4.4B. By the end of the year, we may see a total transaction volume as high as $6B. While sales dollars are outpacing historical averages, the number of transactions is low— many of the sales are institutional buyers deploying capital. Low interest rates and strong market fundamentals have continued to attract larger institutional buyers, and we should continue to see them closing deals through the close of the year. Cap rates continued to compress, hitting 4.3% average for the region as of the third quarter, a steady historical decline. Overall sales values have remained high. The data affirms the market is incredibly healthy, having recovered much quicker than anticipated and to levels superior than those that preceded the pandemic.

Building Sales Velocity

This is another new metric that we’re tracking, similar to Building Income Velocity, but you guessed it, instead examining the buildings sales price per unit and price per square foot from county to county. This shows us which markets are building momentum or showing decline in each of the key areas throughout the region.

Submarket Insights

Urban King

  • Rental rates exceeded those in 2019
  • “Last to recover” market; saw a 90-day vs. 12-month recovery. It happened this summer!
  • Cap rates are lowest in history (but differ depending on who you ask: buyers, sellers, brokers, and reality!)

Rental rates dropped in 2020 and vacancy rates spiked, but so far this year we’ve exceeded the previous peak for rental rates and are well into recovery. Vacancy rates have dropped to below where they were at their previous low in 2019.

Regionally, most of the area had slowly recovered over the course of the past year, but for Urban King County the last 90 days saw the most dramatic changes with drops in occupancy and increases in rental rates. The momentum in urban areas should continue for the foreseeable future.

There is a lot of noise around cap rates and inconsistency in how they’re tracked. It’s possible that the cap rates we’re seeing in Urban King County right now are in fact artificially low. At the peak of the market cap rates were around 4%. Urban markets and eastside have seen the greatest cap compression.

North King

  • Rental recovery has occurred at the cost of occupancy
  • Transaction volume stalled – actual transaction numbers are very low
  • Pricing strength has not fully returned. Price per unit and price per SF hasn’t come back yet

Average rental rates in Snohomish are higher than North King County right now. The area is still seeing fairly elevated cap rates of over five percent. In fact, cap rates are slightly higher than they were in the summer.

Rental rates may continue to rise in North King, but occupancy is staying high. Whereas renters historically would move from North King into Snohomish, it looks as though people are staying closer to the core. With the market returning to pre-Covid numbers, we likely see pre-Covid demographic trends as well, in Lake City and Shoreline for example.

Transaction volume has been incredibly low. There are possible purchase opportunities remaining with the area’s cap rates. Again, as rents in the urban core continue to return, as well as traffic patterns and commutes, renters will shift further north and popularity in the North King areas will drive rental increases.

East King County

  • Greatest rent growth and highest rental rates of the region
  • Highest sales volume in its history
  • Highest pricing, lowest cap (3.3%)

Older buildings are seeing even $2,500 rents, where they have larger average unit sizes which are in high demand by renters today. The Eastside has proven to be the investor darling, with high demand, as shown in the highest sales volume in history, which may go as high as $2B in transaction volume this year. In 2019, transaction volume didn’t even crest $1B. While the sales numbers are soaring, the actual number of building sales remains very low.

Institutional buyers continue to snap up very large and very highly priced properties on the Eastside. Many are also newer properties. This trend won’t end in the near future, the institutional demand is still present regardless of strong pricing. The velocity and shear volume are unstoppable.

South King

  • Consistent rent growth/lowest vacancy
  • Largest decline in number of sales
  • Highest pricing, and cap rate compression with rates at 4.1%

One of most heavily traded, strongest markets in last 10 years. This is the submarket that reigns supreme. Rents have been steadily increasing here since 2011. Occupancy rates spike in 2021 with Covid. Collection loss here averaged 8-10%, whereas the urban areas saw 2-3%. Now collections are picking up, collection loss is lessening, but vacancy rates are staying low, and renters are staying in their units here.

South King County is a heavily traded market with investor demand responding to the rental increases, but in the past year there has actually been a decline in number of sales as would-be sellers hold their properties, particularly related to collection loss during the pandemic. . South King County is sitting at a ten-year low in transaction volume. If interest rates remain low, this pent-up demand may shift and sales volume could rise again.

Cap rates in South King County are the lowest they’ve been in 15 years, and in the same time frame price per square foot of sales here is the highest at $256. The buyer pool is aggressive, and $20-$50 million buildings saw a 20% average increase in price per unit ($282K/unit average). Prices per net rentable foot that we used to watch and wait to hit $200 have gone as high as $313.

Snohomish County

  • Sustained rental rate increases and low vacancy—which was 3.6 % in Q3
  • Larger buildings experienced greatest rent growth
  • Pricing didn’t escalate

To the north, Snohomish County is sustaining consistent rental rate increases and falling occupancy. This area is reactive to the Covid effect of renters moving to areas where they can get more space without being in the urban core. This is a strong and consistent area trend, as renters move to avoid traffic and the commute congestion patterns that are returning. In larger buildings of fifty units and greater, rents saw the highest increase in this area, as much as $250 increase. Smaller buildings only saw an average of $60 per month rental increases, and NOI remains very low. The larger buildings here continue to draw suburbanites as pandemic renters have shifted lifestyles, making this northern county gain in popularity.

There may be missed opportunities in this market as pricing hasn’t notably risen, although there are strong rental rate increases and low vacancy. The average price per unit in Snohomish County hasn’t crested 2019 rates.

Suburban Pierce

  • Highest price/sale, record sales volume
  • Lowest rental rates in region
  • Lowest vacancy in region – 2.5%

Suburban Pierce County is what we’re noting as a ‘sweetheart market’, hitting historic high marks. 2021 saw the area’s highest historical sale price ever. Also of note, Urban Tacoma continues to be considered “up-and-coming”, but as developers continue to swoon over opportunities here, we expect continuing increases in transaction volume and sales prices. We anticipate employer sentiment to mount in Pierce County, something like the Spring District on the Eastside—with companies making announcements to move. While Pierce has some of the lowest rental rates in the region, it also means there is the most room to run and opportunity to grow. At an average monthly rent of $1,511, there is ability to continue to push rents here as vacancy remains the lowest in the region as well.


  • Lowest rent & vacancy for older, smaller buildings
  • Area’s greatest cap rate compression.
  • Bargains still exist in Kitsap! Some sales at $113-$132/SF. Some deals under $100K/unit pricing. Investors gaining confidence in these markets, not just a covid fluke.

In the smaller building sizes under fifty units, there remains a lot of untapped potential. These older, smaller buildings have the lowest rent and lowest vacancy of the region—at around1.5%. New construction here is capturing most of the rent currently. Kitsap County is also showing the area’s greatest cap rate compression, down to 5% from a 2013/2014 high of over 10%. The average price per square foot hasn’t shown such movement, and it’s hovering in the $200 range. This county proves to be where the best bargains remain. Some sales throughout the year occurred around $113-$134/SF, and a series of deals were even under $100K per unit. Kitsap will remain an area where investors are gaining confidence and isn’t a Covid fluke.

Near-Term Forecast

The near-term market is going to prove to be a balancing act, from an occupancy recovery standpoint. The Urban Core is seeing new supply and construction deliveries, and there is already a rental migration heading back into this area. The big question will be whether rental rates can continue to be pushed with the new supply. There are 6,400 units in the construction pipeline in Belltown alone. As this pipeline comes into fruition, we’ll be watching occupancy rates to see how far rental rates can continue to be pushed.

Pushing rental rates is also a challenge for suburbs since they’ll face competition from the urban core and its strong recovery. Whether or not the suburbs will continue rent collections may be a challenge, although collection loss is hitting in the middle single digits, not double digits.

Operators will need to closely monitor their expenses, and there’s a big opportunity in re-tooling technology where possible and to leverage innovations as a way to monitor expenses. Inflationary pressures don’t seem to be letting up anytime soon. Creating operations best practices in this inflationary environment will be essential—while buildings have recovered, they are more expensive to operate.

Another near-term warning is for would-be sellers, to not confuse market reactions with long-term trends. Once rent rolls recover, where do we need to be. With cap rates, are they going to go up? We want them to stay down. At end of 2020, waiting for rent rolls to recover and get properties stabilized, now what. Dylan thinks this is a near-term phenomenon, 6-12 months.

The biggest question for the imminent future is, what’s next—is this the new normal? No, we’ll see some oscillations. There was a swing in the urban core when major employers announced a return of working to the office. Whereas office buildings downtown saw occupancy of only 30%, apartments were at full occupancy and pre-covid rents. Is this a false reaction to the market? Will rents not taper but not grow until back to office? What we are more likely to see is a return to the office with higher square foot per person. This is a “pinch yourself” market, but it’s also a time to be smart about long term goals. If you’re a seller, now might be the time. By end of next year, people getting back to work. It could take another year or so for the market oscillations to reach equilibrium. We’ll be continuing to watch each region’s fundamentals play out.

Long-Term Forecast

There remains a lot of confidence in the Puget Sound market, and our region is ranked #9 by ULI, a dramatic shift from the very real, actual dumpster fire witnessed in June. Capital and lenders are back in the market, investors are looking to place money here and there is good reason too after all the reactions and swings play out. While the Eastside has a lot more but projects underway, there is development coming back in Seattle and we’re seeing strong investor sentiment.

The best thing to happen to Seattle is Bellevue; while the city to the east is today’s darling, Seattle isn’t going anywhere, and there will be a rebalance. People cresting their thirties and wanting to plant roots are going to go north and east, while Seattle is going to remain a hub for culture, nightlife and diversity. These twin cities offering demographic duality to the area have put the entire region on the global radar. With over ten million square feet of Class A office added to Bellevue’s footprint in the next several years, all of the region is growing, something like the Bay area three and four decades ago. We anticipate that over the next couple of years, the entire region is going to continue to strengthen and grow, with little out migration. Recovery has occurred, now we’re going to see the momentum continue with the strong fundamentals in place.

These are just a summary of the insights we’ve gleaned from data we diligently collect each quarter. Our team is also continuing to produce a development report each Spring, as well as a Micro market study in the fall—which will be out next week!


For individualized apartment market insights and to discuss your apartment investment needs – whether buying or selling an apartment building or apartment development site – I invite you to reach out to one of our Team Members and to view our Active Listings.