Renter boom: Apartments filling up faster in Seattle area than anywhere in the U.S.

The Seattle area is filling up new apartments faster than any region in the country, suggesting demand for housing is starting to catch up with the record construction boom — not a great sign for tenants hoping landlords get desperate and drop rents.

The new figures offer fresh insight into the years-long, multibillion-dollar experiment being waged by developers as they build more apartments in the city of Seattle this decade than in the previous half-century combined, betting on the long-term economic health of the region. Will enough renters eventually materialize to fill them, or will the city have a skyline of empty ghost apartments?

We still don’t know for sure — because it can take years for new buildings to fill up, and a lot of them haven’t even opened yet. But after early signs that the region might be getting overbuilt, things are starting to level out. Apartment vacancy rates, while still historically high, have stopped rising for the first time in years as people start moving into all those new buildings at a quicker pace.

In the first quarter of this year, Greater Seattle filled about 3,400 new apartment units, more than any other metro area in the country, according to new numbers from the real-estate data firm RealPage. (New York had the second most.)

Over the 12-month period ending in March, the region filled a net of 10,000 extra apartments, up 15% from the year prior and second only to a stretch from 2014 to 2015.

Most of the new renters are marching into the central part of Seattle, from South Lake Union toward First Hill, where the majority of new units are opening, although Redmond — which, along with Bellevue, has been building the most among suburban towns — is filling up apartments at a fast clip, as well.

“As much as South Lake Union and downtown have built, that’s also where there’s really good strong demand,” said Carl Whittaker, RealPage’s manager of market analytics.

Whittaker cited the region’s strong economy and foreign immigration pull for leading the country in drawing renters, as well as the fact that the metro is building more apartments to actually house them. Only three metro areas in the country — New York, Dallas and Los Angeles — built more apartments than Seattle last year.

Seattle also has a slight advantage in filling up its apartments since the typical units are so small. About 80% of all new units here are studios or one-bedrooms, the most in the country among major cities, according to data compiled by the real-estate website Curbed.

For a while it looked like developers might have been too aggressive with all those new units: Vacancy rates had been rising, recently reaching their highest point since the recession. Building owners struggling to fill up tons of new units all at the same time resorted to offering concessions like a free month’s rent or thousands of dollars in gift cards. The supply-and-demand equation flipped so suddenly that Seattle rents went from soaring at the fastest rate in the country to among the slowest.

Now, generally speaking, apartments in Seattle are filling up nearly the same rate as they are opening.

The most notable change is in the downtown Seattle core — the region’s busiest construction market — which had a whopping 26% of apartments sitting empty at this point a year ago, skewed by all the new buildings; now, it’s down to 12%.

On the other end, South Lake Union just got a wave of new units, and has seen its share of empty units rise from 14% a year ago to 17% now, the highest rate in the region.

What this all means for renters is a bit mixed.

Of course the sheer amount of new buildings has given people more options — especially for those looking for high-end units in Central Seattle — along with the concessions that come with them. Rents have grown at roughly the same rate as inflation for the last year and half, and most forecasts call for that to continue through the end of the year — which is what might constitute a victory for tenants who dealt with rents that soared about 70% this decade, pushing the average rent across all unit types to $1,940 in Seattle, $1,980 on the Eastside, $1,460 in South King County and $1,500 in Snohomish County.

The peak of the new apartment openings is set for this summer. But the strong demand shows it won’t be a complete party for renters hoping tons of empty units would give them leverage to negotiate.

Demand for apartments is ahead of the economic upswings seen around 2000 and 2006, but still lags behind 2015-levels, during the peak of the Amazon-driven population boom. Seattle also led the country in filling up apartments in early 2014, the only other time that’s happened this decade.

At Ascent, a new 251-unit apartment tower in South Lake Union, “it was slow” when leasing kicked off last November, said Aaron Keeler, senior director of development at Greystar, which owns the building.

“We felt like we just had a lot of new inventory on the market at the same time, and these new people moving to town for their prospective jobs at Amazon, Facebook and Google are definitely shopping around for a deal,” Keeler said. Ascent offers four to six weeks free, similar to other new buildings, for those who sign a long-term lease.

But once hiring at those nearby tech companies began picking up in the last few months as new offices opened within walking distance of Ascent, leasing began to accelerate faster than expected, Keeler said.

Greystar’s formula considers about 20 leases a month to be healthy — giving it about a year to fill up Ascent — and it just hit 50% occupancy in its sixth month, putting it on schedule after the slow start.