They must also make the information available to the city, building renters and potential building buyers.

The new energy reporting requirement is a recommendation of the city's multi-stakeholder Green Building Task Force. It is intended to help renters and potential building buyers make more informed decisions, and help building owners identify potential energy conservation opportunities.

Council President Richard Conlin said the legislation will help Seattle reduce its carbon footprint and increase energy efficiency. “People looking for housing and office space will know the energy efficiency of the spaces they consider. This effort will provide a great market incentive for building owners to make their buildings more efficient.”

They have been enticing travelers all year with sweet deals: credits for in-house spas and restaurants, up to 50 percent off five-star rooms, even free nights.

But all that discounting hasn't stopped occupancy from dropping an average of 10 percent. The result? Hotel loans have begun falling into delinquency faster than any other kind of commercial real estate debt.

The rising defaults paint a grim picture for an industry with increasingly more rooms than guests, and more hotels still opening every day. It's a problem that could get worse before it gets better, with demand expected to remain weak and ambitious new projects planned before the meltdown worsening the room glut.

The oversupply means room rates should stay low for at least another year, good news for consumers but not so great for hotel owners and the banks that lent them the cash to build or buy.

The rise in delinquencies is sharp. Five times more hotel loans are behind on payments this year than in 2008, according to mortgage data firm Trepp LLC, which tracks those traded by investors. In October, 8.7 percent were distressed, compared with 1.5 percent last year.

That's almost double the 4.8 percent rate for commercial property and the 4.5 percent rate for stores.

“Right now is an absolutely horrible time to be in the hotel business,” said Ben Thypin, senior market analyst for market research firm Real Capital Analytics.

What happens when a hotel loan goes bad? Banks are much less willing to seize them than houses because running a hotel requires know-how. But some hotel owners are just handing back the keys where property values have plummeted.

In most cases, it is investment funds falling behind on payments, not major hotel companies. They generally don't own much property, instead franchising brands and earning a percentage of sales.

Most of the 1,231 U.S. hotels and casinos with troubled financing are remaining open. So, in the short term at least, consumers can expect to see deals on room rates for at least another year. Executives at STR Global, the hotel research firm, expect demand to rise 1.6 percent in 2010, but average rates to drop 3.4 percent.

Not in the 20 years the firm has collected hotel data has supply and demand been so far apart — not even in the early 1990s recession or after Sept. 11, 2001.

In July, even the posh California resort where American International Group employees vacationed after the company got bailout funds — inciting a wave of populist rancor — was taken over by a lender. Franchisor Starwood Hotels & Resorts Worldwide Inc. is still operating the St. Regis Monarch Beach, but such upscale resorts are still struggling without Wall Street business.

Extended Stay Hotels LLC filed for Chapter 11 bankruptcy protection in June, with $7.6 billion in debt across 681 residence hotels that also depend on business travelers. And Red Roof Inn Inc. defaulted in June on $361.4 million in loans on 131 properties.

Most of the distressed debt is on new or newly renovated high-end resorts built from 2005 to 2007 on dreams of corporate meetings and cocktail hours. Luxury projects approved before the recession are still opening this year and in 2010 — including three Ritz-Carltons.

And even more new hotels are on the way. Because outside investors have to secure the loans and take the biggest risk, hotel chains intend to keep growing — even at the high end.

Starwood is adding 45 luxury and upscale hotels to its U.S. portfolio this year, and about 23 in 2010. InterContinental Hotels and Resorts is signing a contract every day to add to its more than 4,300 properties, the world's largest by room count, said Jim Abrahamson, the British company's leader in the Americas. This year, 335 of the company's new hotels are in the U.S.

Starwood CEO Frits van Paasschen brushes off critics, saying “rumors of luxury's demise are greatly exaggerated.”

“As you look back on the excesses of the 1980s, ‘The Bonfire of the Vanities,' the run-up in prosperity around the Internet boom — even going to Pompeii and seeing the way people were being pampered 2,000 years ago,” he said. “I think luxury, taking care of yourself, taking care of your family and those around you is so fundamental to the human experience.”

Apartment vacancies in King and Snohomish counties continued to stabilize in the fourth quarter of last year, but rents fell, according to a local research firm.

Vacancy ended at 6.8 percent, unchanged from the previous quarter, according to Seattle-based Apartment Insights. But rents fell $21 per unit on average, to $1,017 per month. They peaked at $1,076 in the third quarter of 2008.

Rents dropped most in downtown Seattle, Mercer Island, Factoria, Newcastle, Eastgate, Sammamish-Issaquah and Redmond, falling between $84 and $55 per month.

But the vacancy rate is deceptive because it doesn't include recently opened properties now being leased, according to Apartment Insights. With those units in the mix, vacancy is 9.1 percent.

Many more new apartments are in lease-up relative to historical averages, said Tom Cain, Apartment Insights principal. In downtown Bellevue, for example, there is a dramatic difference between the market vacancy rate of 6.9 percent and the gross vacancy rate of 20.8 percent, which includes properties in lease-up, he said. That area has seen more new construction recently than any other submarket in King/Snohomish, he said.

Generally, tenants are willing to pay higher rents for new construction and those landlords offer attractive incentives, said Cain. This forces owners of older properties to increase incentives and spend more on marketing, which diminishes returns, he said.

A total of 2,573 units opened in the fourth quarter in the King/Snohomish market, more than in any other quarter since Apartment Insights began its research there five years ago.

That brings the total of new construction for 2009 to 5,931 units — nearly double the number built in 2008.

This year, 3,326 units are under construction in the two counties, Cain said. Half are in Seattle, a third on the Eastside and the balance in south King County.

With employment declines projected for this year, the 3,326 units are significant, and should drive rents down this year, Cain said.

“It will just be challenging for owners and managers to (keep) rent and occupancy levels from deteriorating,” he said.

Apartment Insights tracts 50-plus unit properties in the King/Snohomish market.

Despite signs the economy is starting to improve, spending on nonresidential construction is expected to decrease by 13.4 percent in 2010 and increase only 1.8 percent in 2011 in inflation adjusted terms.

Commercial and industrial projects will continue to see the biggest drop in activity. Building for institutions will fare better, thanks in part to federal stimulus spending.

These are highlights from the American Institute of Architects' semi-annual Consensus Construction Forecast, which AIA says is a survey of the nation's leading construction forecasters.

“When economies emerge from (a) prolonged recession, recovery for nonresidential construction activity typically takes longer,” AIA Chief Economist Kermit Baker said in a news release about the forecast.

“Hardest hit will be the commercial and industrial sectors, with projected declines in the 20 percent range for 2010 in most building categories. Led by the health care market, the institutional sector will see far less dramatic declines and should help lead the construction industry into recovery in 2011.”

The AIA Consensus Construction Forecast Panel is conducted twice a year with forecasters including Global Insight, Moody's economy.com, Reed Business Information, the Portland Cement Association and FMI.

The purpose is to project conditions in the construction industry over 12 to 18 months.

There will be more sales closed before the end of the year, but we bet fewer apartment units will sell this year than in any year since 1976, more than 30 years ago.

We didn't look at the long term trend in dollar volume because the impact of inflation would make those numbers meaningless. But even a comparison of units sold understates how dramatic this year's drop is. There are more than twice as many apartment units in the market today compared to 1976, and our population has increased 80 percent. So even though this year's sales activity is almost the same as it was in 1976, it should have been double to just keep up with growth since then.

Financing

There are a lot of reasons investors give for this year's drop in sales activity. Some say there's no financing. We've heard that before, so we've learned it doesn't really mean there's no financing. It just means investors don't like the terms. We surveyed lenders this fall and found more than 20 companies with significant capital ready to lend on apartments.

It's hard to say exactly how much money is available for our market, but a number of lenders surveyed said their goal is to place anywhere from $40 million to $140 million or more in the local apartment market over the next 12 months.

Prices

Another reason given for the dismal sales volume this year is owners are not putting properties on the market because they don't like the fact that prices have fallen. It's true that capitalization rates (cap rates) have increased significantly. They bottomed out in 2007 at 4.8 percent and average almost 6 percent this year. In recent months they've been closer to 6.5 percent, which represents a 25 percent drop in value.

Prices didn't drop that much because net income kept rising, at least until this year. But reminiscing over what was won't get it back. We expect the market and prices will deteriorate more next year, so selling sooner is better if you plan to sell in the next year or two anyway.

Some investors say they are sitting on the sidelines, waiting for prices to fall more before they jump into an uncertain market. And some are just sitting things out until it's clear the market is improving. Neither group can be faulted for inaction during uncertainty. In the play “Waiting for Godot” Godot never showed up. There's a risk in waiting.

Boeing bust

Our market is about to set a new record. Development activity peaked this year, with more than 6,100 new units beginning lease-up. That's the highest level of production in almost 20 years. But things are about to change dramatically. Developers will open fewer apartment units in 2011 than in any other year in the prior 50 years. That's right, developers even built more apartments right after the 1970 Boeing bust than they will in 2011. And when you take into consideration how much larger our population and economy is today, that's saying a lot.

Why does this matter? According to Conway Pedersen Economics, our region will start adding jobs again by next spring. That, along with major demographic changes and in-migration, will fuel demand for apartments. With virtually no new supply in 2011, we expect the rental market will start to tighten quickly. That boosts bottom line performance well beyond any norm.

So, even though investors are facing a rental market that should deteriorate more before it starts improving, they stand to do better financially by investing before the market rebounds rather than waiting and paying higher prices. We expect vacancies to climb more next year and rents to fall some more. That doesn't make the thought of buying now very appealing. But we also expect net income to grow significantly after 2011 because of the lack of new units.

That growth more than offsets next year's deterioration, resulting in higher than normal returns for investors, given today's prices. Of course, it would be great to wait until the very bottom of the market has been reached, if you can time the market, and if you can find what you're looking for then. But with capitalization rates above 6 percent for most of this year, buyers are already getting a risk premium, especially given today's still attractive mortgage rates.

Many investors say they need higher capitalization rates to justify buying today. We contend that even if rates were 30 to 60 basis points lower than they are right now, investors should see returns that compare to those buyers expect in a stable market.