Troop deployment hurt Pierce and Thurston counties, and navy helped Kitsap, reports Tom Cain of Apartment Insights, based on third quarter results.
The vacancy rate for Pierce County is 8.3 percent, up from 6.3 percent in the second quarter. The market peaked in terms of occupancy in the third quarter of 2008 when the vacancy rate was 4.3 percent. This sudden leap in the vacancy rate is due primarily to troop deployment. This is evidenced by the submarkets closest to the military bases.
The navy continues to have a positive impact on Kitsap County. The market tightened from 5.0 percent in the second quarter to 3.9 percent vacancy this quarter. Port Orchard is the tightest market at 3.1 percent vacancy, followed by Silverdale (3.6 percent), Poulsbo/Bainbridge Island (4.4 percent), and Bremerton (4.5 percent). Bremerton showed the greatest improvement from the second quarter. Kitsap is definitely the brightest spot among the five counties that Apartment Insights surveys in Washington.
Last quarter both Pierce and Kitsap were at $31, or 3.7 percent for rental incentives, or concessions. This quarter, Pierce increased to $41 per month and Kitsap decreased to $21 per month. Thurston County’s rate for rental incentives is $38 per month, or 4.7 percent. While the level of rental incentives has increased in Pierce and Thurston recently, it pales in comparison to the King/Snohomish market, where incentives are averaging $94 per month and 9.1 percent.
In Pierce rents have declined $6 per month for the past two quarters. They currently stand at $827 per month and $0.98 per square foot. Rents jumped $20 per month in the third quarter in Kitsap to $853 per unit and $1.01 per square foot. Since we understand that the market in Thurston has softened from the previous quarter, we believe that rents most likely declined in the third quarter, to $817 per month and $0.97 per square foot. Fourth quarter results will help us to gauge the rate of softening in that county.
There is very little construction activity in the three counties. There are 254 units under construction and 179 units planned in Pierce County. There is no construction activity of 50+ unit properties in Kitsap and Thurston counties.
The most obvious change occurred in Pierce County with its vacancy rate jumping 2 percent to 8.3 percent due to troop deployment. Kitsap and Pierce have registered employment gains for the five month period ending in August. In Thurston employment declined slightly. State budget cuts will contribute to a continuing decline in demand for apartment rentals in Thurston County.
While weakening demand has impacted occupancy in Pierce and Thurston, the major plus is on the supply side. There is almost no new construction or planned construction that will compete with the existing inventory for renters in any of these three counties.
