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Weaker job growth slowing Seattle apartment rent growth, AvalonBay execs say

AvalonBay Communities Inc. executives are predicting a slowdown in rental market fundamentals in Seattle in 2018, as job growth slows and high levels of new apartment construction continue.

Seattle has been a hot spot for new apartment construction in recent years, but in previous quarters, executives at real estate investment trusts that own apartment buildings in that market said overall business was still good despite the competition from new buildings — largely because of a strong job market driven by Amazon.com Inc. and other technology companies.

The new-supply trend is expected to continue, with apartment deliveries rising roughly 4% across the Pacific Northwest for the second consecutive year, COO Sean Breslin said. In Seattle specifically, the company is expecting 12,000 new units to come online in 2018, compared to 9,000 in 2017, Breslin said.

At the same time, he said, the market is projected to produce roughly 30,000 new jobs in 2018, compared to roughly 45,000 in 2017.

Market rent growth is showing signs of slowing in Seattle as a result, Breslin said. "I wouldn't say it's falling off a cliff," he added, "but based on what we've seen, we would expect it to slowly decelerate throughout 2018 absent some major pullback in terms of employment there."

Seattle, which makes up roughly 5% of AvalonBay's portfolio, is expected to post the greatest deceleration among the company's markets, Breslin said.

New apartment construction has hurt landlords' power to raise rents in markets across the country. Besides AvalonBay, executives at both Equity Residential, which owns properties largely in coastal urban cities, and Mid-America Apartment Communities Inc., which focuses its investments in smaller Sun Belt markets, said on recent conference calls that they faced downward pressure on rents as a result of new construction.