We are seeing properties “For Rent” far more in 2023 compared to recent years. As we look through rent rolls, we are routinely seeing vacancies that equate to 10% or higher. Just this week, a conversation with one of our most trusted clients revealed that he currently has more vacancies than ever before in his 20+ years as a landlord.
The data supports what we are seeing. The Spokane County Multifamily vacancy rate sits at 6.5% as of October 2023. In the third quarter of 2023 alone, 823 new units were delivered. To put this in perspective, Spokane County has averaged 1,100 units delivered each year for the last three years. So far in 2023, 1,271 units have been delivered and there is expected to be 621 more by the end of the year, totaling 1,892 new units in 2023. The amount of new construction in Spokane County has skyrocketed due to high population growth from 2018-2021.
Some notable apartment complexes under construction include Magnesium Village (504 units in North Spokane), The District (298 units in the U-District), The Marjorie at Aspen Park (226 units in Airway Heights), and 47 South Apartments (216 units in Airway Heights). There are currently 2,009 units under construction in Spokane County and they are all expected to be completed by August of 2024.
January 2022 vacancy rates were sitting at just over 1%, so the question remains, should we panic? Vacancy rates are predicted to peak in Q3 of 2024 at 7.5% before normalizing over time. We expect rates to continue to climb, but with rising construction costs and rising interest rates, we also anticipate some apartment projects being delayed or even canceled because the numbers don’t pencil out for developers.
These rising vacancy rates have already had an effect on rental rates and will most likely continue to affect them through Q3 of 2024. Rent growth over the last year sits at -0.1% for Spokane County. Class A apartment rent growth sits at -1.2%, Class B sits at -0.2%, and Class C sits at 2.5%.
We expect rental rates to remain flat or even slightly decreased through Q3 of 2024. Despite this, due to current high interest rates, there is a large chunk of people priced out of the Spokane housing market who may be forced into renting. This will keep demand high for renters in Spokane County despite the other factors.
SVN Cornerstone Multifamily Team
Nate Gant is an Advisor with SVN Cornerstone. Nate has been an active member of the Eastern Washington real estate community since 2010. He has brokered more than $100 Million in real estate transactions, specializing in land development, REO and investment properties. To get in touch with Nate, email nate.gant@svn.com or call 509.993.4440.
Jordan Lester is an Associate Advisor with SVN Cornerstone. Jordan served as a brokers assistant for 3 years with SVN Cornerstone before becoming a full time broker. Jordan specializes in the multifamily sector of commercial real estate. To get in touch with Jordan, email jordan.lester@svn.com or call 509.496.6922