It’s tough to find a vacant apartment in Whatcom County these days, and that could mean higher rents in the coming months.
Last fall the apartment vacancy rate was estimated at 1.6 percent locally, according to a report published earlier this month by the Washington Center for Real Estate Research at Washington State University. That’s the lowest apartment vacancy rate recorded by the center since it began studying this area in the fall of 2000.
“That (vacancy rate) is extremely low,” said Glenn Crellin, director at the research center. He noted many developers are comfortable building more units when the vacancy rate is around 5 percent. “I see two trends that usually happen when the vacancy rate gets this low: the first is more pressure will be put on rental rates. The second is developers will build more units.”
The low vacancy levels already are affecting rental rates. According to the report, the average rent for an apartment in the fall of 2010 was $746 a month, up from $737 in fall 2009. The peak average rent paid, according to the report, was $759 a month in fall 2008, when the vacancy rate was 2.5 percent.
The study focused on apartment buildings and not home rentals. Whatcom County has an estimated 14,612 apartment units, according to the report.
A major factor for the low vacancy rate is the lack of apartment construction locally since the financial meltdown in the fall of 2008, said Tom Follis of Wm. T. Follis Realtors.
The lack of apartment construction is especially acute in Bellingham. In 2010 the city issued only one multi-family building permit, for an eight-unit building. That was fewer than nearby Ferndale, which issued five permits for 22 units last year. In 2007, when condominium projects were popular and access to credit was easier, Bellingham issued 42 permits for 266 units.
With so little inventory becoming available and Bellingham — particularly Western Washington University — continuing to grow, Follis expects the rental price for an apartment to rise between $15 and $50 a month within the next year, depending on the location and condition of the building.
“Rents will rise until more competition enters the marketplace,” Follis said.
One reason for the lack of construction has been the difficulty to get a loan. Crellin expects lending to start loosening up in multi-family building projects as the economy recovers and vacancy rates continue to decrease across Washington. The apartment vacancy rate across the state last fall was 4.8 percent, according to the report.
A few Bellingham multifamily building projects are moving forward. Last month Rick Westerop applied for building permits to build a five-story mixed-use building in the empty lot on Railroad Avenue across from Depot Market Square. Four of the floors will contain 56 apartment units, while the ground floor is available for commercial use. Westerop has plans for three other apartment buildings of similar size depending on market conditions.
A building permit also has been filed for an 18-unit, three-story apartment at 1026 21st St., in the Happy Valley neighborhood.
In his own research as an appraiser, Follis said the apartment vacancy rates are lowest around the university and Lynden. Follis estimates areas such as Ferndale and Blaine have vacancy rates in the 4 percent to 5 percent range.
With vacancy rates this low, it’s also prompted more inquiries from investors looking to buy apartment buildings locally, he said.