With a vacancy rate below 2 percent, it’s tough to find an apartment in the Tri-Cities.
Our growing population has outpaced development, sending vacancy rates down and rents up. But the same trends that are frustrating renters are drawing investor interest to the Tri-Cities.
That means supply could begin to catch up with demand.
Three construction projects and a pending sale confirm the market is gaining traction with both developers and investors.
- Park Place, the long-awaited development at Richland’s infamous pit, aka 650 George Washington Way, begins by the end of the year. Crown Development and local partner Boost Builds are finalizing financing for the 106-unit project. It will be the Tri-Cities’ first mid-rise complex with underground parking and street-level retail.
- Copper Mountain Apartments will be a 276-unit garden-style complex with units reserved for low-income renters in Richland’s Badger South area. The developers applied for permits in August to build a dozen structures along with a clubhouse and carports at 2555 Bella Coola Lane. The $43.7 million project is seeking $35 million in financing from the Washington State Housing Finance Commission.
- Badger Canyon Apartments, a 640-unit complex by Edward Rose Co, secured permits for the final 240 units earlier this year. A spokesman called the project a winner for the company.
575 Columbia Point, a 94-unit project that opened last summer on the Richland city golf course, is under contract to sell for $17.75 million this month. The price works out to $189,000 per unit, a new record for a Tri-City apartment property.
Supply catching demand
Three construction projects and a sale may be cold comfort for renters trying to find shelter in an ultra tight market. But collectively, the four independent events signal growing confidence that the Tri-Cities is a good place to invest in rental property.
And that suggests a greater willingness to build the units that the Tri-Cities needs to keep up with the region’s population growth.
The metro population topped 290,000 in 2017 and is likely to cross the 300,000 threshold this year, if it hasn’t already.
“We have to be popping up on more people’s radar screens,” said Carl Adrian, president and CEO of TRIDEC, the Tri-City Development Council.
The vacancy rate for all apartments in the Tri-Cities dipped to 1.8 percent in the spring, according to a semi-annual survey of landlords by the Runstad Department of Real Estate at the University of Washington. The average rent was $834.
There are about 100,000 homes and apartments in the Tri-Cities, according to U.S. Census Bureau. About 64 percent are owner-occupied and 30 percent are rentals.
While the Tri-Cities added 6,500 new residents in 2017, it only added about 2,000 new homes and apartments. With demand outpacing supply, prices for both homes and apartments are rising.
Apartment List, a research firm, said the Tri-City rent median jumped to $945 in 2017, putting the squeeze on renters. More than 43 percent of renters were considered “cost burdened” by rent, meaning they pay 30 percent or more of their income for shelter.
The Edward Rose experience at Badger Canyon Apartments, near Interstate 82 and West Clearwater Avenue, is a telling example of strong demand. The company announced the then-$40 million project in 2011 and began building around 2015.
“We can’t build them fast enough,” said Rob Hughes, director of engineering. “They’re being occupied immediately.”
Rent starts at $895 for the smallest units. The final phase includes 240 units spread across five two-story buildings. They should be available in late 2019.
Park Place, at Richland’s city entrance, is another sign the market is maturing.
The four-story project will be the first urban-style project in the Tri-Cities, packing more units onto less space. It’s likely to be a model for the future, particularly as Pasco expands into the Broadmoor area and Kennewick to Vista Field.
It’s the brainchild of Chicago-based Crown Development and the local team of John Crook and David Lippes, who formed Boost Builds this year to pursue urban development in Richland’s core.
Crook confirmed the team is still finalizing financing through the federal Department of Housing and Urban Development. It has pushed its plans for an Oct. 20 ground breaking back but is confident it will happen by the end of the year.
Separately, Boost Builds is working with an architect to convert a vacant Tri-Cities Professional Center office building at 1200 Jadwin Ave. into loft-style apartments.
Once the design is finalized, Boost will secure bids and project financing. Crook said it will be at least six months before work starts.
Copper Mountain Apartments, the 276-unit project under consideration in Richland, is a potential game-changer for Badger South. Little has been announced, but the owners characterized it as a low-income apartment facility to the Washington Housing Finance Commission, which provides financing such as tax credits for projects that promote the public interest.
The commission held a public hearing on the project on Sept. 29. No decision has been announced. The project will set aside an unspecified number of units for qualifying low-income renters.
If built, it will be the first apartment complex in the Badger South area, conceived as a walkable, sustainable neighborhood with a mix of housing types.
The pending sale of 575 Columbia Point is possibly the strongest signal that investors see the Tri-Cities as a strong market.
The buyer is being represented by Tim Ufkes, senior vice president and director of the national multihousing group in the Seattle offfice of Marcus & Millichap, a leading commercial real estate firm.
The 575 Columbia Point buyer needs to reinvest proceeds from the sale of a Yakima property to defer capital gains.
He called 575 an ideal investment. The project is new, 95 percent leased, has a new and assumable mortgage, boasts strong rents and has enduring amenities, like access to the Columbia River and the nearby city golf course.
It is one of four deals he has pending in the Tri-Cities.
Unique to Washington
Marcus & Millichap called out the Tri-Cities as a desirable place to invest in multifamily real estate in a 2018 outlook published in February.
Investor confidence is rising outside of Seattle, it noted, citing confidence in Central Washington, “specifically the Tri-Cities.”
To Ufkes, the $2.4 billion annual budget for Hanford provides the economic stability investors love.
“There isn’t another market like that in the state of Washington,” he said. He currently has four Tri-City deals pending, including the 575 Columbia Point sale.
The nearest comparable sale is the $32 million sale of Badger Mountain Ranch apartments in south Richland in March. The 176-unit complex went for $181,818 a unit.
Ufkes’ interest extends beyond single-property sales.
He’s marketing 671 acres west of Pasco’s Broadmoor Boulevard to prospective developers. The property is part of the 1,500-plus acre Broadmoor development area targeted for dense, urban development by the city and the private property owners, including Ufkes’ client.
The city of Pasco is finalizing designs for a new sewer line as well as a master plan to guide development. With sewer service, the sand dunes of west Pasco could be replaced with 8,300 houses, condos, apartments and townhouses and a collection of office buildings, coffee shops, stores and hotels.
Ufkes said the growth projections and local demographics are an easy sell. While no deals have been signed, one national home builder has expressed interest in building all the homes.
Ufkes expects to see more Park Place-style development at Broadmoor to accommodate demand from downsizing baby boomers who want condo-type lifestyles. It’s going to lead to a big change in thinking.
“You may end up with a Whole Foods. I’m not sure why you wouldn’t. You may end up with a Trader Joe’s. I’m not sure why you wouldn’t,” Ufkes said. “It will be quite different that what you have now.”