Research by Kidder Mathews shows the King County apartment market is indeed feeling the effects of the COVID-19 outbreak. The latest rent and occupancy trends report reveals sustained collection losses are being experienced across a survey of 44,000 properties.

Kidder Mathews’ multifamily investment team, led by Dylan Simon and Jerrid Anderson, write in their report, “First, news headlines certainly don’t tell the whole story, much less the real story, of how Seattle area apartment buildings are performing. Second, the apartment market is doing just fine – and certainly significantly better than nearly all other commercial real estate asset classes. Finally, we are in early innings of how the current pandemic will impact the broader economy, and specifically the Puget Sound Apartment market.”

Historically, troubles in economic markets first cascade in the form of declining rental rates. In the case of the current COVID-19 pandemic, the local apartment market is behaving – at least as of now – a bit differently. Rental rates remain steady, reports Kidder Mathews.

Rental rates, averaged across 44,000 units, started in January at $2.30-per-square-foot and as of April 15, 2020, have climbed a nominal 0.3% to $2.32-per-square-foot. The Simon and Anderson team agree 0.3% rental rate growth in just over three months is not good.

Occupancy in Kidder Mathews’ sample set of apartment units was 93% in January 2020, and as of April 15 had ticked up slightly to 93.1%. “We would expect occupancy rates to improve in spring months, and they did so marginally until April when the market responded to a post Stay Home, Stay Healthy environment,” writes Simon and Anderson, who expect to see greater vacancy in the market – “it’s just a matter of when and by how much.”

The percentage of rent collected – or rather, the percentage of rent not collected – is not the sexiest metric to track, especially in healthy markets, points out Simon and Anderson. “However, in times of economic softening (dare we say the “R” word – recession?), it’s time to dust off the old financial statement to recall “just how bad it got” last go-round,” they wrote.

This time is different – truly different, they say. Until at least June 4 of this year, renters cannot be evicted for non-payment of rent, nor can landlords assess late fees for non-payment, reports Kidder Mathews.

These circumstances, coupled with an unprecedented spike in unemployment, naturally lead to a huge uptick in collection loss. Accordingly, collection loss more than doubled from 2.9% in January to 6.6% as of April 15 in King County, reports Kidder Mathews. “To those reading local and national headlines, single-digit collection loss may not seem that bad – and it isn’t,” concludes Simon and Anderson.

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