Luxury Rentals Take a Hit in Richmond
As the majority of new stock is upscale, the metro’s multifamily rent growth decelerated in the first few months of 2018, falling behind the national average.
Richmond rent evolution, click to enlarge
Richmond–Tidewater rent growth decelerated in the first few months of 2018, reaching 1.1 percent as of May and once again falling behind the U.S. rate. The bump is mostly due to supply catching up with demand at the upper end of the spectrum, as the vast majority of new stock is upscale. While the number of Class A assets continued to grow, job gains in highly paid sectors shifted down a gear, which is dampening demand in the short run.
Tepid job growth in Richmond and Hampton Roads remains the area’s well-known chorus, as the region’s main anchors continue to greatly influence the local economy. Targets of deep defense cuts just five years ago, military bases and contractors across the Hampton Roads area are now bound to benefit directly from the turning of the budget tide. This could, in turn, send positive ripples across the area’s economy, strengthening residential real estate fundamentals along the way.
Investment volume and per-unit prices dropped in the first four months of 2018, with investors heavily focusing on value-add plans. While occupancy in stabilized properties slid 70 basis points year-over-year to 94.7 percent as of April, and roughly 1,200 units came online across the metro in the first five months of 2018, steady demographic expansion should keep demand relatively healthy this year. We expect rents to grow 2.5 percent in 2018.
