A wave of new apartments launched in the past year will start appearing in the Tri-Cities in 2016.
Two projects alone will add almost 1,000 units in Kennewick and Richland. There are about 14,000 units in the Tri-Cities.
The first phase of Badger Canyon, a 642-unit complex at 10251 Ridgeline Drive in Kennewick, debuts with 168 units in the spring.
In Richland, the city approved land use permits for a 331-unit addition to The Lofts at Innovation Center. Construction is expected to begin by mid-year at the north Richland site.
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The Kennewick project is being developed by a privately held, third-generation apartment builder out of Bloomfield Hills, Mich. Edward Rose & Sons, with 65,000 units across the U.S., liked what it saw in the Tri-Cities, said Rob Hughes, director of engineering.
“We see so much growth around that area, and with the elementary school going up, it’s a good location,” he said. “We looked at the Kennewick market and growth pattern and made the decision.”
It’s no secret what drives developers: Occupancy rates and asking rents are rising. It’s a lucrative combination that offers potential for strong financial returns.
There seems to be a lack of rental units.
Greg McCormick, community planning director for Kennewick, which has jurisdiction over the Badger Canyon project
Benton County’s apartment vacancy rate was just 2.6 percent last fall, according to the most recent survey of landlords by the University of Washington’s Center for Real Estate Research. Franklin County’s was even tighter at 1.9 percent. The state average was 3.4 percent. The average monthly rent was $824 in Benton County and $680 in Franklin.
The average rent in Washington increased 8.5 percent in the past year as demand outpaced supply.
“There seems to be a lack of rental units,” said Greg McCormick, community planning director for Kennewick, which has jurisdiction over the Badger Canyon project.
High-end, new construction has been missing from the Tri-Cities, said Derrick Stricker, a commercial broker with NAI Tri-Cities.
“The need for good multifamily in good locations is definitely pent up here,” he said.
And it’s not just renters looking for a place to live. Investors who want to buy apartment properties are frustrated, Stricker said. A new generation of local investors who started with duplexes and fourplexes is ready to graduate to larger properties. But there’s little available.
“I hope these products come out of the ground,” he said.
Rusty Morse, who specializes in investment real estate with Coldwell Banker Commercial, brokered a deal to sell a 30-unit apartment complex to a California investor several years ago. Outside investors like the strong, steady returns that come with local real estate.
“Cap rates here are generally a little higher than they would be in Portland, Seattle or Tacoma,” he said, referring to capitalization rate or the rate of return on an investment, which is akin to the interest rate on a savings account. “We’re going to be a half point better or higher.”