A Snapshot of the Pacific Northwest Multifamily Real Estate Market

It has been roughly one year since the global pandemic put the multifamily real estate market on hold and the U.S. economy suffered its biggest blow since the Great Depression. Back in March of last year, the real estate market looked to be headed into a steep decline due to widespread stay-home orders. Fortunately, multifamily weathered the 2020 recession better than most property sectors. Still, it was a tough year, as many owners lost rental income plus ancillary income from waived fees, deferred rents, and delinquencies. As we enter the second quarter of 2021, the outlook for the multifamily real estate market in the Pacific Northwest trends positively for vacancy rates and rent growth. Read below for specific submarket snapshots.

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VANCOUVERMultifamily

12 Mo. Delivered Units
891

12 Mo. Absorption Units
1,336

Vacancy Rate
4.2%

12 Mo. Asking Rent Growth
3.9%

More apartments are under construction in Vancouver than anywhere else in the Portland-metro area.
Despite the construction surge, demand is high and vacancies are low.
Vancouver’s rent growth has outperformed the overall Portland metro for the past six years, and year-over-year submarket gains are significantly stronger than Portland’s performance amid the pandemic.
The fourth quarter of 2020 set a record with more than $250 million in deals closed.

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PORTLANDMultifamily

12 Mo. Delivered Units
6,391

12 Mo. Absorption Units
6,122

Vacancy Rate
6.6%

12 Mo. Asking Rent Growth
0.8%

In contrast to many Western U.S. metros, vacancies declined slightly in Portland in 2020.
Rent levels in Portland have fully recovered to pre-pandemic levels. (Nationally, rents were essentially stagnant last year. In Seattle, they fell by more than 3% and in San Francisco, by more than 12%).
Some newly remote workers are leaving pricey coastal cities for less dense, less expensive options, and Portland seems to be reaping the benefits of that trend.

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SALEMMultifamily

12 Mo. Delivered Units
784

12 Mo. Absorption Units
872

Vacancy Rate
3.5%

12 Mo. Asking Rent Growth
3.3%

Salem’s vacancy rate is substantially below both Portland’s performance and the national figure.
Continued demand for apartments has fueled rent growth in Salem, which is now performing near the top of all Oregon metros.
Cumulative rent gains in Salem outpace Portland’s performance.
It is likely that Salem apartments will see rising vacancies, falling rents, delayed developments, and slowing investments following significant challenges from the coronavirus pandemic.

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TRI-CITIESMultifamily

12 Mo. Delivered Units
414

12 Mo. Absorption Units
347

Vacancy Rate
4.8%

12 Mo. Asking Rent Growth
5.2%

Apartment rents in the Tri-Cities market rose 7.7% in the past quarter, and had an average annual gain of 4.2% over the past three years.
In addition to the 520 units delivered over the past three years (a cumulative inventory expansion of 4.7%), there are 500 units currently underway.
Vacancies moved up slightly over the past four quarters, but were basically in line with the 10-year average.

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Eviction moratoriums have been extended until June 30, 2021 in Washington. Extensions to eviction moratoriums in Oregon make it possible for tenants to remain eligible until June 30, 2021 as well.

Oregon Landlord Compensation Fund: The Oregon State Legislature special session passed a $150 million landlord compensation fund that compensates up to 80% of past-due rent not collected from qualified tenants after April 1, 2020, but requires landlords to forgive the remaining 20%.

Washington Eviction Resolution Program (ERP): In September 2020, the Washington Supreme Court issued an Order authorizing the creation of the Eviction Resolution Program “ERP” in King County, Pierce County, Snohomish County, Spokane County, Thurston County, and Clark County Superior Courts. Landlords in these affected counties will be required to participate in the ERP prior to filing any unlawful detainer action for non-payment. ERP is currently a voluntary program, but will become compulsory when the Eviction Moratorium expires on March 31, 2021.

The TMG Multifamily Quarterly Market Pulse is brought to you by TMG Multifamily, an AMO accredited property management company providing a full suite of management services for existing apartments, new developments, lease-ups, and mixed-use properties. TMG partners with investors to proactively identify strategic opportunities and maximize their return on investment. Locally owned and regionally focused, TMG has been helping clients reach their financial goals since 1985.