Seattle Apartment Market Alignment Analysis

Thesis (Master's)--University of Washington, 2013This thesis will explore the alignment between demand and the supply of apartment pipeline developed in the Seattle area through 2016. This topic specifically deals with the possibility of overdevelopment or a bubble in the apartment market, which could result in lower returns for investors. This threat to investor expectations necessitates the assessment of the alignment between supply and demand as a matter of due diligence for any investor. This thesis will use a Market Analysis method and Net Absorption Model technique to forecast through 2016. Tenure and apartment capture ratio will be the specific focus of the analysis. The primary findings of the research show that the boom portion of a possible bubble is already well underway. A bubble effect is almost unavoidable, due to the use of contemporary financial instruments. Tenure and Apartment Capture Ratios will need to be very elevated to avoid record high vacancy rates, which is unsustainable for this elongated duration. The resulting misalignment of the market will likely occur before 2016.Other factors will soften the impacts of overbuilding the apartment stock, like apartment conversion into condominiums, financial market changes to apartment investment volumes, and investors purchasing previously owned residential properties for rental purposes, tight individual mortgage market credit, and Amazon.com's continued aggressive hiring in the center of Seattle