MARKET SNAPSHOT: Vacancy Continues to Fall Despite Stagnant Employment Growth in D.C.
By Philip Shea, Associate Editor
Even as government spending cuts and other factors continue to limit job growth across the nation’s capital, multifamily occupancy has remained tight. Yet the strength of the sector’s performance in the coming years remains unclear, with the latest annual report from Hendricks-Berkadia forecasting that vacancy may once again begin to rise by the end of the year and into 2014.
However, the firm’s most recent quarterly report reveals a drop of 20 basis points between December and March, with suburban Virginia registering an even larger dip of 30 points. Additionally, rents rose by 2.7 percent between the first quarters of 2012 and 2013, cementing a basic positive trend for apartments—at least in the short-term.
Yet a 20 basis point increase in the unemployment rate in the first quarter may instill some caution in developers, with total completions in the first quarter coming in at a meager 870 units—a 67.6 percent decrease from the previous three months. Permitting also decreased and is expected to contract 10.4 percent by the end of the year.
This development stands in contrast to the large number of deliveries initially expected, with forecasts at the end of last year predicting the delivery of nearly 8,000 units in both 2013 and 2014. It remains unclear how many units will reach the market by the end of the year, and such will obviously have a considerable effect on occupancy levels.
Hendricks-Berkadia notes that employers looking to expand their workforce include the Metro transit system, which will likely hire 1,000 employers over the next few quarters. However, these positions will likely be low-paying and boost demand for Class B and C product specifically.
Science Applications International Corp., on the other hand, recently announced plans to shrink its workforce by around 350 workers, and many agencies within the federal government are refraining from filling vacancies until the full effect of sequestration is realized.
The average apartment in the D.C. metro raised asking rent by 0.2 percent over the past three months to $1,489 per month. Yet within the district specifically, rent actually decreased by 0.1 percent to $1,519 per month—a high price, yet one resulting from a trend not in line with historically high rent growth levels seen in primary markets across the country.
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