Recently John Gillem and Elliott Krivenko, analysts at CoStar gave insights into the trajectory of the apartment market in the Pacific Northwest
As the prolonged supply glut recedes and demand rebounds, the national vacancy rate is expected to ease in the second half of 2024. However, this easing will vary across regions, particularly in smaller, high-growth areas that have experienced robust occupancy growth over the past decade. Four such areas in the Pacific Northwest stand out: Coeur d’Alene (Idaho), Bend (Oregon), Missoula (Montana), and Idaho Falls (Idaho).
CoStar analyzed apartment markets with inventories under 10,000 units, tracking occupancy growth (net change in occupied units) over the past 10 years. The top 10 performing markets spanned the Pacific Northwest, Midwest, and Sun Belt regions.
Here are some key findings:
- Midwest Markets:
- Mankato (Minnesota), Duluth (Minnesota), Grand Forks (North Dakota), and Rapid City (South Dakota) were initially overlooked by developers in the last decade.
- Vacancies in these markets ranged from 6.3% to just under 10% in mid-2014.
- As residents sought affordability, existing inventory leased up, and vacancies dropped significantly.
- Mankato, Duluth, and Grand Forks now boast the lowest vacancy rates in the smaller market group (3.2% to 4.3%).
- Sun Belt and Pacific Northwest:
- Rapid population growth and developer interest in rising rents led to a surge of groundbreakings.
- Coeur d’Alene (4,377 units), Bend (3,365 units), Bowling Green (Kentucky, 3,157 units), and Hilton Head Island (South Carolina, 3,030 units) saw significant occupancy expansion.
- Coeur d’Alene and Bend doubled their inventories (151% and 117% growth rates, respectively).
- Hilton Head Island expanded by 98%, and Bowling Green by 62%.
- Outlook for the Pacific Northwest:
- Coeur d’Alene, Bend, Missoula, and Idaho Falls will see vacancies unwind and occupancies strengthen.
- Coeur d’Alene and Bend will continue to attract outdoor enthusiasts seeking an elevated quality of life.
- Missoula’s population surged post-pandemic due to net in-migration from cities like Seattle.
- Idaho Falls remains attractive due to affordability and accelerating economic growth.
In summary, these smaller markets offer unique opportunities for growth and quality of life, driven by factors such as population dynamics and outdoor appeal. CoStar predicts a positive trajectory for the Pacific Northwest as it navigates new deliveries and borrowing costs. 🌟🏡🌲