Hello!
Two months ago, I said if you don’t have plans to increase rents over the next year, you will likely fall behind the market. This is true today, sooner than many owners and managers anticipated.
Overall Market
- Regardless of COVID restrictions, rents are increasing substantially in both Eastern Washington and across the nation, with forecasted increases for the remainder of 2021.
- Interest rates appear relatively stable and there is good news for multifamily lending: Fannie Mae is no longer requiring their COVID reserves, and Freddie Mac has reduced their reserve requirements to only 6 months of payments for purchases.
- Landlords are still working to understand new WA legislation passed into law this month. SB 5160, HB 1236 and SB 5096 were all passed into law. Some will be challenged in court, but for now the law has been passed. Interested in more details? Give me a call to discuss proactive solutions to prepare your operations for new legislation.
My Deals
I send a separate weekly email that includes every multifamily property (5+ units) on the market in Eastern Washington (Spokane, Tri-Cities, Yakima, Walla Walla, etc.). Want to make sure you’re on that list? Subscribe here or reply to this email.
Multifamily
- As mentioned above, rents are on the rise. Rentcafé reports year-over-year rent growth of 8% in Richland, 9% in Kennewick, 7% in Spokane, and 9% in Spokane Valley.
- One regional property manager is increasing rents by an additional $100 nearly every time a unit is vacant and comes to lease. When they take a vacant apartment to lease-up, they receive a handful of applications within one day.
- In addition, I toured multiple Class B+ properties in Spokane last week and every property is leased up through August with a waitlist of tenants for through the summer.
- What’s driving the tenant demand?
- Inland and suburban markets have seen an influx of migration during COVID as remote work and suburban lifestyles attract previous downtown renters and families.
- Home prices have skyrocketed, with multiple offers on nearly every home on the market. In March 2021 vs. 2020, Spokane home prices increased +20.7% and Tri-Cities +12.9%. This has priced many buyers into the rental market, one of the reasons Class A apartments have seen the highest rental increases.
- Through COVID, long-term tenants stayed put. Property managers are seeing less natural turnover as tenants aren’t sure they’ll find a better location and price for a new apartment if they were to move.
- The net impact: If you are leasing up vacant units or re-evaluating lease rates, make sure you survey the latest market rents. If you an investor looking to acquire, there is likely more meat on the bone for income upside than you would have forecasted three months ago.
Development
- Multiple new construction apartments are in their lease-up phase today. Leasing is ahead of projected timelines at higher rental rates than developers originally forecasted, continuing to signal strong demand and rent growth.
- For example, a 60-unit project in Pasco was fully leased in 2 months’ time. A Richland project leased their first building (24 units) in one month and their second building (36 units) is 50% pre-leased before the building opens. Absorption is proving seamless for developers coming to lease in today’s market conditions.
- Across the nation, multifamily construction sentiment continues to rise, so don’t expect to see a slowdown in construction starts in Eastern Washington any time soon.
Have questions on any of the above? Please give me a call to discuss – 509.221.9354
Best,
Mason Fiascone
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