A strong economy and resultant vigorous rental market in King and Pierce counties has begun trickling down to Thurston, driving its vacancy rate down to 5 percent, a record low for several years.
Small industries moving into the county also have strengthened the market, especially from the telecommunications field, as have soldiers coming to Fort Lewis.
Until now ,the market had seen a glut with vacancy rates around 8 percent, according to Dan Crowe, division manager for The Rants Group, which manages 450 rental units in the county.
During the past eight months rentals started moving again, says Crowe. In fact, he says, the market has been so brisk that his company has raised rents on single-family homes and duplexes.
It had been a long time since rents went up, says Crowe, adding that Rants made it through the rental glut without lowering rates, but that the option was considered,.
“We’re a little e tentative right now – gun shy,” says Crowe.
Tim Seth, chief executive officer, attributes the glut in rental units to the passage of Initiative 601 in 1993. The initiative put a cap on spending by state government, Olympia’s biggest employer.
Too many apartments were built on the expectation of new industry and anticipated growth in government, including Fort Lewis, explains Seth. Base closings in the early ’90s led many to believe that Fort Lewis would gain personnel, he says, but it didn’t happen.
“It’s been hard to attract business, besides government, down here,” says Seth.
The good news for property managers is that the market is now slowly and steadily correcting itself, he says.
In Pierce County vacancy rates are also lower, down to 3.27 percent in June compared to 4.51 percent in December of 1997. Across the county vacancy varied from 1.36 percent in Fife/Milton to 5.07 percent in Gig Harbor.
Puyallup/Sumner was also very low at 1.43 percent.
Rents are unchanged in Tacoma but up in all other areas of Pierce County except Fircrest/University Place, where they are down 1.49 percent.
In Fife/Milton they are up 5.56 percent, according to the CB Richard Ellis marketing report.
In the County as a whole rents are up only 0.71 percent for this year, compared to 3.36 percent in Dec. 1997.
Across the region vacancy rates changed little, but rent increases slowed to an average of 2.81 percent. Near Seattle rent gains were stronger than in late 1997.
Short term demand for housing will remain extremely strong, the report predicts, but it should ease longer term. Growing scarcity of land will prompt developers to buy and renovate or replace older properties, especially in urban areas.
The report predicts 1998 could see the first year of $1 billion in sales of apartment buildings in the Puget Sound region. In 1996 there were just under $600 million in sales in the area, followed by a record $800 million plus in 1997.
Already this year there have been $500 million in apartment sales, not including a large portfolio sale by Lincoln Property to Equity Residential Properties of Chicago that closed in early July.
Many sales are to real estate investment trusts, four in the area by BRE of San Francisco and four by Avalon Bay Communities of Virginia.
Prices are also increasing. CB Richard Ellis reports Puget Sound apartments sold for an average $67,000 a unit during the first half of the year, $25,000 more than 1997 averages.
In Pierce County there were 17 sales totalling 991 units. Average price was $37,100 a unit, up $10,000 since 1997. Largest sale was Harbor Village in Gig Harbor, bought by Bruce Thayer for $5.75 million.
Despite the hot market, little new construction is planned, so supply continues to tighten, at least as far north as Tacoma. With prices soaring and rents holding relatively steady, the investment return is the lowest in many years.
CB Richard Ellis is a leading commercial real estate service based in the Puget Sound.
By Marie McNamara, Business Examiner staff