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Rental respite: Landlords continue to woo tenants with sweet deals

First-time buyers of moderate means are finding competition stiff for affordable homes in the Greater Seattle area. But if you shop instead for moderately priced apartments, it's as if it's another planet.

To put it plainly, the welcome mat is definitely out. Landlords continue to woo new tenants with all sorts of incentives — from free rent for a month or two to actual rent rollbacks — as the Puget Sound apartment rental market stays where it's been for more than a year.

That's in the doldrums, says Mike Scott, co-owner of Dupre1Scott Apartment Advisors, a Seattle real-estate research and consulting firm that just released its semiannual apartment vacancy and rent-rate report.

However, after a couple of years of softening, there are now signs the apartment market has hit bottom and may be turning, Scott says.

"We're at the very beginning of a trend now, in the opposite direction of the trend over the last two years, which was flat or declining rents, more vacancies and more concessions," says Scott. "For renters that means they're going to see fewer properties offering concessions, and the amount of concessions will start to go down, but this won't happen overnight."

Today, from a renter's perspective, "there's plenty to look at," adds Bart Flora, co-owner of Cornell & Associates, a local firm that manages 5,000 Seattle apartments. He's among the many landlords who've found they have to be flexible to fill apartments. This means accepting pets in buildings where they weren't welcome before and agreeing to six-month leases instead of a year.

"Both those help fill units," Flora says.

• King County's spring vacancy rate is 7.1 percent (anything over 5 percent is considered a "renter's market"). That's marginally tighter than last spring's 7.5 percent. Meanwhile average rents have fallen $14 to $840 and the number of properties offering rent incentives has dropped, too, from 73 percent to today's 67 percent.

• Vacancies in Snohomish County are down half a percent to 8.5, and average rents are down almost $30 to $746. Four-fifths of the landlords continue to offer incentives.

• Pierce County renters have more to choose from as vacancies have climbed from 6.7 percent to 8 percent. The percentage of landlords offering incentives also is up, reaching 59 percent. Meanwhile, average rents have stayed the same at $674.

• Perhaps because of its active Naval facilities, Kitsap County has a much tighter apartment market than it did a year ago when vacancies reached 9.1 percent. Today they stand at 5.6 percent. Not surprisingly, average rents are up, averaging $731 — a $40 increase over a year ago. Meanwhile, the percentage of buildings offering incentives has dipped to 42 percent, the lowest in the four-county region.

Scott says current rents actually understate what tenants are paying because they don't take free-rent incentives into account. But because many apartments charge extra for carports or garages and pass on water bills directly to tenants, it's impossible to gauge what renters in general actually pay for shelter.

According to Scott, a major factor in the soft market is very low mortgage-interest rates. They've made the home-purchase market hot, and renters opting to become homeowners has been "a huge factor" in keeping the apartment market soft.

Adds Greg Laycock, of the real estate firm Cushman & Wakefield: "Today it's amazing that with the low interest rates it might be cheaper to own a house than to rent an apartment." There are other reasons for the lackluster apartment market, too, particularly a lackluster economy that isn't adding many new jobs.

"When we don't have jobs, we don't have as many people moving into the area, so demand for apartments pretty much dries up," Scott explains. "But developers kept building new apartments because of the long timeline involved. It's not like making widgets; you can't ramp apartment construction up or down overnight."

Laycock says the jobs that have been added have changed the rental market. Gone are many of the $80,000-$120,000 a year technology careers that sustained the luxury rental market in areas like Belltown. What's replaced them is work paying $40,000 to $50,000 that obviously cannot support high rents.

Laycock says this has left managers of pricier properties with no choice but to lower rents or accept vacancies. "There are still high-paying jobs being created, but they're not as prevalent as before," he observes, adding landlords "are hoping they'll come back."

In the coming year, Scott and others expect the demand for apartments to go up.

"Leasing rates are up from last fall," observes Shawn Hoban, president of Everett's Coast Real Estate, which oversees 9,000 Puget Sound area apartments. "We're pretty confident we've reached the bottom of the cycle."

For renters this means rents may soon be rising, instead of steady or falling as they have been, and the freebie incentives to get them in the door will become less plentiful.

But deals will still be out there for a time because any rent increases will be property specific, Hoban says. "It depends on the neighborhood and it may depend on the occupancy level just at that property."