New apartments hitting the Tri-Cities market. Tenants being wooed with free rent

Renters may finally be getting the upper hand when it comes to leasing apartments in the Tri-Cities.

Move-in specials, including free rent, are common as a wave of new construction coupled with hotel conversions adds a wave of new rental units to the market this year.

The Tri-City Herald tallied more than 1,030 apartment units under construction in 2023. Today, many of those have started to welcome rent-paying tenants.

But the market is considerably softer than it was a year ago, according to a study by CoStar Group, a real estate research firm, published by TMG, a Vancouver-based developer and property manager active in Tri-Cities.

The Tri-Cities vacancy rate topped 7.75% at the start of the year, more than double the 3.7% rate of 2020.

The average market rent stood at $1,370 per month. That’s up 1.7%, but still well below 13% growth recorded in 2021. The 10-year average is 4.4%.

The cool-off means it takes longer to fill new properties.

It once took six to eight months to fully lease a new complex. Now, takes a year to 18 months.

Free rent

The cool-down has revived an old standard: Offering customers deals to sign leases.

CoStar reports that it is now common to expect one month free. Some properties routinely offer three months.

The Goat at Broadmoor, a 220-plus unit complex at 1-602 Burns Road in west Pasco, recently began leasing units. Terms include two months of free rent with a year-long lease.

The Goat, originally referred to as “Hydro at Broadmoor,” is being built in tandem with Affinity at Broadmoor, a 170-unit complex catering to residents age 62 and over.

Construction is ongoing, but both the Goat and Affinity are welcoming tenants and some units are ready for immediate move in. Monthly rent starts at $1,575 at The Goat and $1,857 for Affinity.

It isn’t unique. Several new projects are offering one or more free months to new tenants.

Columbia River Walk, 2120 W. A St., on the Pasco waterfront, is offering two months of free rent through a promotion at the top of its website. Asking rents weren’t immediately available.

The Banks on Bradley is another new project using the promise of free rent to attract tenants. The $40 million, 160-unit apartment complex by Cedar and Sage, 355 Bradley Blvd. Richland, is still a construction site.

But it has begun leasing finished units to interest tenants and is offering two free months on its website. Monthly rent at The Banks starts at $1,544.

Slowdown coming?

The Tri-Cities apartment market is echoing a national trend, according to Tim Ufkes, a senior broker in the Seattle office of Marcus & Millichap, a commercial real estate brokerage.

Ufkes specializes in apartment properties and works extensively in the Tri-Cities, including the Broadmoor development area.

He said the market is soft nationally with nearly 500,000 new units coming into the system this year. “Concessions,” ie free rent and related specials, are part of the process of balancing supply with demand.

“The Tri-Cities will add about 2,000 units in 2024 and as a result, vacancies have indeed increased, rents are a little soft and concessions are definitely being offered,” he said.

The construction surge could end with a slowdown.

CoStar dates a slowdown in construction to the rising cost of construction and the cost to financing it. The dip started in 2023 and will slow the delivery of new projects in the near future.

Ufkes said the slowdown is still to come, but not until 2025.

When it does, vacancies will drop and rent-free deals will fade, he predicted.

Under construction

While economists predict a construction slowdown, there is plenty to keep Tri-Cities builders busy.

Examples:

• The Falls, a a 105-unit apartment and commercial complex at 4112 W. 24th Ave. in Kennewick. Elite Construction & Development is the builder.
• Southridge Apartments, a 180-plus unit complex with a food court is getting started on property immediately south of Southridge High School in Kennewick.
• The 120-unit third phase of the Jubilee Foundation’s Tierra Vida neighborhood is under construction in east Pasco.
• Clearwater Lofts is a 32-unit townhome development under construction on West Clearwater Avenue in Kennewick.

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