August 9, 2020
Apartment sales slowed in the first half of 2020 in Seattle, yet pricing remained nearly on par with 2019 sales due to investor demand and low interest rates. New research by Kidder Mathews’ Multifamily Simon Anderson team shows momentum in the Puget Sound economy—and apartment market—carried the day for apartment sales in the first half of the year. Although pricing did not increase year-over-year, sales continued to close at pricing very near that of 2019, reflecting surprisingly strong fundamentals and investors’ faith in the market.
Kidder Mathews’ Dylan Simon wrote, “It might be a little difficult to look past the drop in sales volume compared to the first half of 2019, but average pricing and capitalization rates in 2020 have a surprisingly positive story to tell apartment investors. The most important takeaway? Deals are still getting done.”
The Puget Sound apartment investment market experienced record sales volume in 2019, principally driven by a new excise tax moving would-be-sellers off the fence. It’s no surprise, therefore, that sales volume would drop in 2020. What is surprising is that amid the COVID-19 pandemic, pricing held relatively strong.
Kidder Mathews reports there were 83 multifamily sales transactions in H1 2020 totaling $506 million in sales volume. When comparing quarterly numbers, Kidder Mathews notes there were 46 deals completed in Q1 2020 and 37 in Q2 2020. Still Q2’s sales volume of $261 million exceeded Q1’s $245 million. Additionally, Q2 average price per unit was $245,457, compared to Q1’s $215,127, though cap rates in Q2 came in at 4.8% compared to 4.7% in Q1.
Simon added, “It is practically a miracle that any sales closed in the second quarter of 2020. To say investment markets were a mess in the first half of the year is a vast understatement. Operational performance of apartment communities in Seattle and the Puget Sound are holding up extremely well; however, we expect sales volume to decrease markedly for the remainder of the year.”
For comments, questions or concerns, please contact Dennis Kaiser