In the span of one week in February, Doug Wight received two calls from people interested in developing apartment buildings in the area.
As of late, that’s a lot of interest, said Wight, who owns Windermere Property Management by Ebright Wight, and it’s a sign of improvement for the multifamily housing industry.
“New construction has been pretty quiet for about two years now,” Wight said.
Judging from what Wight is hearing, that silence is starting to break. It’s a matter of supply and demand, and the apartment vacancy rate locally is low, while demand for apartments is high, he said.
In fall of 2010, the vacancy rate for apartments in Whatcom County was 1.6 percent, according to results from an apartment vacancy survey by the Washington Center for Real Estate Research. That’s the lowest vacancy rate in the 10 years the center has tracked local numbers.
Building cycles usually occur in 10-year increments, Wight said, and another cycle of multifamily construction is beginning.
Whatcom County commercial and single family real estate markets won’t likely see as much improvement in 2011, but industry representatives and experts said they are getting better, too.
Bill Henshaw, a commercial agent at Windermere’s Bakerview Road branch, said there was a lot of interest in commercial real estate in 2010. Still, that interest didn’t translate into many closed deals.
“I had a terrible year last year,” Henshaw said.
From his perspective, commercial and industrial vacancies in the greater Bellingham area were probably slightly higher in 2010 than they were in 2009, when commercial vacancies hit 6.07 percent and industrial vacancies hit 6.69 percent. Office vacancies were 7.15 percent in 2009, but Henshaw thinks that rate was lower in 2010.
Certain areas had especially high vacancy rates in 2009. Old Town and the Fairhaven waterfront had the highest commercial vacancy rates, clocking in at about 57 percent and 30 percent respectively.
Old Town and Squalicum Harbor had the highest office vacancy rates, which both hovered around 17 percent.
The highest industrial vacancies were in the Fairhaven waterfront — 26.26 percent — and the Meridian Corridor — 22.33 percent.
The vacancy rate downtown was pretty middle of the road in 2009, Henshaw said. The office vacancy rate there was about 10 percent, and the commercial was nearly 8 percent.
“Judging by what has occurred in the first month and a half, it should be a significantly better year. There seems to be more confidence.” Bill Henshaw, Windermere Real Estate
Henshaw, who is in the process of gathering information for the Whatcom County Real Estate Research Report for the year 2010, expects numbers from last year to show a higher overall vacancy rate. He attributes a slow 2010 to financing and permitting barriers, and said very few businesses are willing to go out on a limb without knowing whether their projects will be approved in the end.
Last year may have been rough, but Henshaw expects 2011 to show improvement.
“Judging by what has occurred in the first month and a half, it should be a significantly better year,” Henshaw said. “There seems to be more confidence.”
Banks seem to be considering well-financed projects, Henshaw said, and he has received a lot of inquiries from Canadians, who are looking at this area more for bargains. The job market has not bounced back, but the population is increasing, and with that more small business will sprout, he said. Also, the manufacturing industry is expected to pick up.
“We’re seeing some positive signs and that always helps fuel the confidence level,” Henshaw said. “The year is yet young and so I am very optimistic that this is going to be a better year.”
Single family homes
Julia Hansen, editor of the Whatcom County Real Estate Research Report and professor of economics at Western Washington University, is also putting together information for the 2010 report. Hansen’s information, which she has already collected, focuses on single family homes.
Last year, 2,014 houses were sold in Whatcom County — that’s 8.6 percent fewer homes than sold in 2009, Hansen said.
Last year’s decline was even greater than the 4.7 percent drop between 2008 and 2009.
“Sales are about half of what they were at the peak,” Hansen said, adding that sales peaked in 2004 with 4,454 home sales. “So that’s a huge, huge, huge decline.”
But, Hansen said, that drop isn’t as bad as it looks. The federal Home Buyer Tax Credit expired at the beginning of 2010 and the market slowed significantly after that, which skewed the numbers.
“There are signs of stabilization, but it doesn’t look to me like we’re in the recovery phase yet,” Hansen said. “A big reason for that is the slow economic recovery.”
Fewer houses are selling and they are selling at lower prices than they were when the median sale price in Whatcom County peaked at $290,725 in 2007, Hansen said. The median price in 2010 was $255,000, which is 2 percent lower than it was in 2009.
The year-over-year price drop is quite small in general, though, Hansen said. It’s also smaller than the decline between 2009 and 2008.
One factor affecting prices is distressed sales, of which there were more in 2010 than in previous years, Hansen said. Foreclosures and short sales brought the 2010 median price down, but at the same time, mortgage rates hit a low at the end of last year, which helped sales, she said.
One bright spot is that the multifamily housing market isn’t just stabilizing — it’s improving, Wight said.
“The value of multifamily housing right now is at an all time high,” he said.
Banks are happy lending when vacancy rates are 5 percent, so Whatcom County’s less than 2 percent rate in fall 2010 likely loosened them up a bit, Wight said. In general, banks have only recently shown interest in providing loans for multifamily investments, he said.
While a low vacancy rate is good for developers, it’s not so great for renters. The low rate means renters have less choice, Wight said, and means rental rates will probably increase. The average rent in fall of 2010 was $746 per month, according to the report by Washington Center for Real Estate Research.
But the high vacancy rate will likely spur developers to meet the demand for more multifamily housing, Wight said.
Until more multifamily units become available, though, Wight expects the vacancy rate to further decrease, but not by much.
“I don’t know that it can get much lower,” Wight said. “I think it’s pretty tight right now in the multifamily area.”