Hundreds of new apartments, townhomes starting to open around Kitsap

EAST BREMERTON — Not ready to buy a house, but looking for a home larger than an apartment unit, 36-year-old Bremerton resident Robert Mathisen and his girlfriend moved into a newly constructed townhome off Wheaton Way in September. 

The three-floor, two-bedroom townhome, with a little over 1,400 square feet, at the new Mills Crossing, located a block west of Highway 303, fit their lifestyle. Mathisen said he used some interior space as a game room, and his girlfriend enjoys crafting at home.

They pay $2,500 per month for rent for what Mills Crossing developer Harbor Custom Development Inc. describes as "luxury" townhomes. Based on the new construction, amenities and location, Mathisen, who works in the real estate industry, said he thought the $2,500 rent was fair, even at an increase from the $900 they'd been paying for an apartment near downtown Bremerton. 

"We're pretty happy at the moment," Mathisen said, adding that pay raises and new jobs allowed them to move up to a home that better fits their needs.

Kitsap's job growth and a shortage of multifamily rental housing have attracted new developments to the county. Developments that have been in the permitting and construction phase prior to and during the pandemic are now coming online, with renters like Mathisen now moving in. 

Despite a recent slowdown, Kitsap's rental market is still considered positive, and more multifamily projects will follow Mills Crossing by opening their doors into 2023.

The average rent per apartment unit in Kitsap County ranged from $1,600 to $2,500 in the third quarter of 2022: $1,684 in Bremerton, $1,746 in Port Orchard, $2,017 in Poulsbo and $2,509 in Bainbridge Island, according to data from the Washington Center for Real Estate Research (WCRER) at the University of Washington.

The research center collects data on housing rental markets for cities with a population of more than 10,000 in the state and show what most looking for housing on the Kitsap peninsula already know: rent has been on the rise for the last decade. Data from 2012 show that average rents ranged from $958 in Bremerton to $1,666 in Bainbridge Island in the first quarter of 2012.

Kitsap attractive to apartment developers

After the Great Recession halted construction of new multi-family developments for roughly a decade, developers found pent-up demand in Kitsap County.

In 2019, Tarragon kicked off its first land acquisition in Kitsap County, buying land on NE McWilliams Road near Safeway to build over 200 apartment units, called Camber Apartments. In 2020, Tarragon acquired land on Sidney Road SW near Highway 16 in Port Orchard to build 216 units called Haven Apartments, according to Brianne Kelsey, senior director of development at Tarragon.

Related:Here are the residential housing projects under development in Kitsap County

Tarragon is a real estate company managing land development and real estate transactions in the Puget Sound area since 1995. The company has offices in Seattle and Sumner in Pierce County. Kelsey said the company saw the need for more multi-family housing in Kitsap County.

"The housing supply and the employer market help provide the indicators for us that there was an under met need in Kitsap County for our product type," Kelsey said.

Haven Apartments and phase one of Camber Apartments are both in the leasing stage, though portions of the development are still under construction. Some tenants started moving into the buildings in October. Rents for the two projects range from $1,715 for a one-bedroom unit in Haven to $2,635 for a three-bedroom unit in Haven and Camber.

In April, Harbor Custom Development, owner of Mills Crossing, shifted its strategy and started to focus on developing more rental units instead of single-family homes, said Jennifer Lang, director of marketing.

Mills Crossing is the first multi-family rental housing project that's open for leasing among a series of multifamily rentals Harbor started to build in late 2021 and earlier this year, Lang said.

Following Mills Crossing, which started accepting renters in August, Harbor expects its Belfair View apartments (228 units) in Mason County (previously known as Olympic Sunset View Apartments) will begin leasing in late November, Lang said.

Two other rental housing projects by Harbor Custom Development in Kitsap County, Broadmoor Commons in Bremerton (32 townhome apartments) and Bridgeview Trails Apartments in Port Orchard (138 units), are under construction. It is estimated that the buildings will be open for leasing at the end of 2023, Lang said.

"We like this area," Lang said. "We will continue to look for projects that fit our needs."

Market rates retreating some in 2022

Compared with the start of the pandemic, the multifamily market in Kitsap County, along with markets in Pierce County and Thurston County, is trending down, according to Yardi Matrix, a company that provides data and research reports on the commercial multi-family housing industry.

Rental discounts have been seen on some of the apartments' rental websites. Camber and Haven Apartments have $700 off move-in special discounts on Apartments.com. Harbor is offering the first month's rent free for Mills Crossing.

"We have seen a slowdown in the market as a whole. All Bremerton has," Lang said. "We do hope to see them start to pick up."

The current occupancy rate for Mills Crossing is 40%, according to Lang.

The rent growth in Kitsap, which was the percentage increase in average rents relative to the same quarter in the previous year, reached a low point in the second quarter of 2020: 2.1% in Bremerton, 1.2% in Port Orchard, 0% in Poulsbo and 1.3% in Bainbridge Island, according to WCRER.

Rent growth sped up in late 2021 and early 2022 — 17.6% for Bremerton in Q3 2021 and 12.8% for Port Orchard in Q1 this year, but the growth rate went down again later. In Q3 2022, Bremerton's rent growth fell back to 1.5% and Port Orchard's was 7.7%, according to WCRER.

Since the start of the pandemic, developers have been more active in creating housing in suburban zones of the Seattle-Tacoma area, including Kitsap County. However, this trend is coming to a halt, as buildings in urban areas will be delivered and developers are looking for renters, which is forecast to ease the demand in the Seattle-Tacoma area, according to Yardi Matrix's analysis.

"We're seeing a moderation in the Tacoma and Seattle area," said Doug Ressler, manager of business intelligence at Yardi Matrix. "Still positive, but it's not growing as fast."

Inflation and the Federal Reserve's action to keep raising interest rates could make developers rethink their plans to build new apartments, as the cost of a company to finance new development has increased compared with 12 months ago, Ressler said.

Diverse renters find housing

Camber and Haven Apartments now serve a diverse group of residents: singles, roommates and families; local Kitsap residents and newcomers. Kelsey attributes it to Tarragon's strategy to provide spaces for residents to integrate with each other — in the clubhouse, fitness center, pool, and at the dog park and playground.

Most of the residents in Mills Crossing are young singles. Some are retired Navy and one set of tenants is a family, Lang said.

Based on the demographic of Kitsap County, Harbor anticipates that Mills Crossing will attract residents between 25 and 45, as well as Navy families and travel nurses working in Kitsap County, Lang said.

Despite still working to find renters in a slowing market, one Harbor executive says the company believes Mills Crossing will fill unmet demand.

“We believe the high-quality finishes and close proximity to the Kitsap Transit Center make Mills Crossing an ideal home for renters in the area,” Harbor Custom Development Chief Operating Officer Jeff Habersetzer said in a statement.

Reach breaking news reporter Peiyu Lin at pei-yu.lin@kitsapsun.com or on Twitter @peiyulintw.

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