Colliers International’s Seattle Multifamily Team Releases Second-Annual Market Study on Efficiency Apartment Units in Seattle
SEATTLE, WA – Dylan Simon and Jerrid Anderson of Colliers International’s Seattle Multifamily Team released their second-annual Efficiency Unit Study, reporting on key metrics for Micro Studios and Small Efficiency Dwelling Units in Seattle’s urban core.
Key takeaways from the 2018 Efficiency Unit Study include:
- Efficiency units are going mainstream: Today, efficiency units are no longer relegated to congregate buildings of their own — they are crucial ingredients in many market-rate developments. Of the 4,699 efficiency-unit development pipeline, 1,001 units are part of traditional apartment developments that include standard studio, one-, and two-bedroom units.
- This affordable product is successful in both bull and bear markets: Since 2009 — even through the Great Recession — average rental rates for Micro apartments have seen 80% cumulative rent growth and sustained 6.7% year-over-year rental-rate growth. Micros are expected to continue growing rents 40% to 50% faster than market-rate studios.
- Investor demand is compressing cap rates: Since the Seattle Multifamily Team launched the first Micro apartment sale in the market three years ago, investor demand has reduced the cap rate spread by nearly 50 basis points for Micros, while SEDU sales compressed cap rates within 30 basis points of market-rate apartment sales. Further compression is likely as more investors realize that these small units generate 35% more income per square foot than standard market-rate apartments.
- While market-rate apartment absorption is weakening, SEDU and Micro absorption remains strong: Urban King market-rate apartment supply grew by 6.9% (8,035 units) last year while vacancy in core markets pushes above 5%. As the most affordable options in our city, Micro and SEDU apartment supply has not yet satisfied demand, keeping vacancy under 5%, despite a 10% increase in stock thus far in 2018.
“The reason that data collection and dissemination are so important is to educate the buyer community,” Anderson explained. “Market-rate apartments as we know them have been around for 190 years — investors have had a long time to understand how they operate and what they can expect when they own one. Most of the buyers of Micros and SEDUs have never developed or owned them before, and the lack of information makes it challenging for them to be as aggressive as they would offering on a standard apartment building.”
Until the Seattle Multifamily Team’s first Efficiency Unit Study in 2017, no data source in the market tracked rent, vacancy, sales, or development specific to these small units. As leading Apartment Sales Brokers and experts on the unique asset class of Efficiency Apartment Buildings, Simon and Anderson conduct extensive market studies as a benefit to clients, both in advisory services and in the sales process.
The results speak for themselves: the Seattle Multifamily Team holds records for both price per unit and price per square foot among SEDU sales, and remains the only team in Seattle to close sales for Micro apartment buildings.
For a copy of the full report, click here.
About Colliers International Group
Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) is an industry-leading real estate services company with a global brand operating in 69 countries and a workforce of more than 13,000 professionals. Colliers is the fastest-growing publicly listed global real estate services and investment management company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $20 billion of assets under management from the world’s most respected institutional real estate investors.
Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers has also been ranked the number one property manager in the world by Commercial Property Executive for two years in a row.
For the latest news from Colliers, visit Colliers.com or follow us on Twitter (@Colliers) and LinkedIn. To see the latest news on Colliers International in the Puget Sound Region, follow @CI_PugetSound on Twitter or check out the website at www.colliers.com/seattle.
Colliers’ Seattle Multifamily Team is based in downtown Seattle and comprises seven highly-qualified real estate professionals specializing in brokerage of apartment investments and developments in the Seattle and Puget Sound region. The team focuses on representing buyers and sellers of apartment buildings and development sites from 5 units to 500 units.
Marketing & Research Director | Puget Sound
+1 (206) 223 1438