Expense Pressures Quietly Squeezing Multifamily Returns in the Puget Sound
Puget Sound apartment fundamentals remain stable, with strong regional occupancy and modest rent growth across many sub-markets. On the surface, performance appears steady. However, the more important story for owners today is happening below the revenue line. Operating expenses are rising faster than rents, quietly compressing net operating income.
Insurance premiums have become one of the most volatile line items. Over the past 12–24 months, many multifamily owners in the region have experienced 25–100%+ increases in annual premiums as carriers adjust for higher replacement costs and stricter underwriting standards.
Property taxes are also trending upward as assessed values adjust throughout King, Snohomish, and Pierce counties. Because assessments often fail to keep pace with market shifts, many owners are being taxed on valuations 5–20% above current market values, especially for properties where land represents the primary value.
Utilities remain another pressure point, especially in older buildings with central hot water and heat. Water, sewer, and electricity costs have generally risen in the 5–10% annual range, reducing margin flexibility for owners who absorb those expenses.
The widening gap between stabilized rent growth and elevated expense growth is influencing how buyers underwrite opportunities today. Operating efficiency, capital improvements, and expense history are playing a larger role in valuation conversations than they did just a few years ago. For example, a building generating $100,000 in NOI valued at a 5.5% cap rate would be worth approximately $1.82 million. If expenses rise by $10,000 annually, reducing NOI to $90,000, the value drops to roughly $1.64 million—a loss of about $180,000 in equity.
In the current environment, protecting margins is no longer just about pushing rents—it is about proactively managing expense risk and understanding how these trends affect long-term positioning.
On the Platt-Urquhart-Douglas team at Paragon, our expertise goes beyond just a listing. We’ve tailored our brokerage approach to help owners not only prepare for a sale today but also plan for sales down the road—by navigating the ever-changing multifamily market in 2026 and beyond. Give us a call if you’d like to strategize what the next 12–36 months could look like for your investment property.
If you would like to know more about 1031 exchanges, want to know the market value of your investment property, or would like a referral to a tax, legal, or 1031 exchange professional, please feel free to reach out to anyone on their team:
• Brian Platt — Brian@Paragon-REA.com | (206) 251-8483
• Michael Urquhart — Michael@ParagonREA.com | (425) 999-6650
• Ben Douglas — Ben@ParagonREA.com | (206) 658-7247
• Rowan Davis — Rowan@Paragon-REA.com | (206) 406-9105