A cousin to Proctor Station will soon rise from a parcel north of Metropolitan Market.
Starting next month, The Rush Cos. will start demolishing roughly a dozen buildings on the site. The company will break ground on the 141-unit, six-story apartment building, Madison25, shortly thereafter.
Construction should be well underway by summer, said Chris DeWald, vice president at Rush.
The new building includes 141 internal parking spots, with amenities mirroring those offered at Rush’s Proctor Station a short walk away: a fitness center, community room with demonstration kitchen, a bocce court, a rooftop herb garden and a rooftop kitchen.
New apartment residents could start moving in by fall of 2018, DeWald said.
Of Madison25’s 141 apartments, more than 80 percent are either one-bedroom units or studios, DeWald said.
Apartment construction in Pierce County is at record levels, with thousands of units projected to enter the market through 2019. Nationwide, apartment building is at a pace not seen since the 1980s, according to a paper by lender Freddie Mac published last year.
So many apartment projects are moving forward that it’s driving up construction costs, DeWald of Rush said.
Proctor Station opened in January 2016 and cost $32 million to build. It is substantially similar to Madison25, which DeWald said could cost $36.9 million to build.
“In Tacoma, the rents don’t support the cost of construction anymore,” DeWald said. “I think we are at the break point — at least in Tacoma. … It may still work in Seattle, but down here it’s hard to make sense out of it.”
While Tacoma’s land is much cheaper than Seattle’s, the costs to hire crews and pay for the materials is roughly the same, he said.
“The subcontracting community as well as the material suppliers are taking advantage of a huge demand,” he said.
Studio rents at Madison25 could start at $1,275 per month with an average of 578 square feet. A single bedroom unit averaging 650 square feet could start at $1,375. A two-bedroom apartment with around 1,000 square feet could start at $1,925 per month.
That might seem expensive by Tacoma standards — where the median-priced apartment in February rented for $1,107 per month, according to real estate data firm Zillow — but people used to prices in the Seattle area would call that a deal.
Madison25 rental applications will be accepted starting in spring of 2018.
REGIONAL RENT CLIMB CONTINUES
Seattle’s median apartment rent in February was $1,975, per Zillow. The data show the median price for an apartment of any size in buildings with five or more units.
Home values are rising faster than rents in Seattle, according to Zillow. There, rents increased by 9.7 percent over the same time last year, while median single-family home values increased 11.6 percent — to $687,900 this February compared with last.
Tacoma is in the same position, but the prices are much lower, the data show. Tacoma apartment rents climbed 11.3 percent in a year, and home values jumped 12.3 percent this February over a year ago. Tacoma’s median single-family home value in February, however, was $245,000.
Late last year in Tacoma, homebuyers faced a competitive market. In some areas of the city, fewer than one month’s worth of inventory was available, leading to bidding wars. A balanced market, where homebuyers and sellers are on equal footing, has five or six months’ worth of inventory.
“If you’re a prospective buyer about to enter the market, keep in mind that it’s rare to get the first home you make an offer on, and homes in particularly hot markets frequently sell for over asking price,” said Zillow chief economist Svenja Gudell in a news release.
RUSH PURSUES ‘WELL-HEELED’ RENTERS
Many of the apartment buildings under construction in Tacoma include “micro-units” — apartments of 450 square feet or smaller.
Rush doesn’t buy into that approach.
“Those typically are young folks in the entry-level market that are just trying to get the cheapest accommodations they can find,” DeWald said. “That’s really small. You start getting below 450 square feet and it’s just one room and a place to sleep.”
DeWald said Proctor Station’s clientele is disproportionately retirees — something he didn’t expect when the building opened in January 2016.
“We found a lot of people selling their homes and going for this urban lifestyle,” he said. “This is a pretty well-heeled renter, for sure.”
DeWald said he expects the same for Madison25. The building is across from upscale grocer and deli Metropolitan Market. He envisions fresh food preparation or classes in Madison25’s demonstration kitchen, with residents walking across the street to fetch ingredients for their own meals.
The development includes ground-floor retail of about 8,800 square feet, and DeWald said the company hopes to secure a restaurant for a high-profile corner area with “outdoor seating opportunities.”
“I think we are definitely looking for restauranteurs in the Seattle or Bellevue area,” he said Wednesday.