While apartment construction is expected to slow nationwide, Tacoma is now considered a top-10 market nationwide for multifamily investment by federal mortgage lender Freddie Mac.
The lender predicts Tacoma will be third in the nation for income growth in 2017, at 5.8 percent. Coupled with a relatively low apartment vacancy rate this year of 3.2 percent, it makes Tacoma a hot commodity for those looking to invest in apartment construction.
Tacoma is topped only by Sacramento and Seattle in the Freddie Mac list of cities poised for income growth with low apartment vacancy rates. New York City, Oakland and San Francisco fell out of the top 10 list this year, perhaps because the rents and salaries have already risen so high, the lender said.
Strong apartment demand in Seattle and Portland will allow landlords to raise rent this year, Freddie Mac said, while Tacoma’s demand is fueled largely by overflow of people priced out of Seattle. Rent for a median-price apartment of any size in the Emerald City sat at $1,800 in December with relatively stagnant rent increases for the year, according to real estate data firm Zillow.
Freddie Mac predicts incomes will rise nationwide by 3.4 percent and expects apartment vacancies of 5.2 percent for 2017.
Predictions were outlined in an investor-focused publication authored by the lender.
Tacoma’s low vacancy rate likely contributed to its double-digit rent increase last year, Zillow said.
Freddie Mac predicts a 5.6 percent apartment vacancy rate and 5.9 percent income growth in Seattle next year.
Compared with Seattle, a median price Tacoma apartment of any size is a steal at $1,100. But many commuters will find the gridlock on Interstate 5 hard to bear, with several spots along the commute from Tacoma to Seattle rated among the worst in the nation and one-way commute times hovering around an hour or more, with “rush hour” lasting for several hours.
Other cities on Freddie Mac’s top 10 list include Colorado Springs, Colorado; Phoenix; Tampa, Florida; Chicago; Jacksonville, Florida; and Los Angeles.
Nationwide, the number of renter-occupied households has increased in the past decade, from around 35 million in 2007 to nearly 44 million in 2016, the Freddie Mac paper states.
“To keep up with the rise in renter households, multifamily construction has reached the highest levels since the late 1980s, when tax-code changes spurred the market,” the paper states.
Pierce County is entering a boom in apartment buildings, with record construction and more than 3,500 units that could come online this year through 2019.
Many investors already are here, with some building so-called “micro-units” targeted to millennial renters. Other companies are buying old properties and fixing them up, such as the 168-unit Orion Apartments in the Stadium District or Unico Properties’ plan to renovate the historic Washington Building in Tacoma’s downtown from office space to approximately 155 apartments.