Market Snapshot: Washington, D.C. Voted as a Top 10 Metro for 2009
- Dec 04, 2008
By Teresa O’Dea Hein, Managing EditorA change in presidential administrations is always good for the real estate market in the nation’s capital, which was relatively strong already, points out Greg Willett, vice president for research and analysis at M/PF YieldStar Inc., based in Carrollton, Texas.Both M/PF YieldStar and The Urban Land Institute (ULI) ranked Washington, D.C. as one of their top metros for 2009. ULI’s 2009 “Emerging Trends in Real Estate” ranked Washington, D.C. in the number-three slot. ULI particularly values a metro’s 24-hour fundamentals and access to major airports. Already, Washington, D.C. is the healthiest of the nation’s very active apartment construction centers, adds Willett, “and it looks likely to remain that way.” Ongoing development at the start of 2008’s fourth quarter was about 10,400 units, with a sizable block of that comprised of properties that began construction as condos but now will complete as apartments. With that much product on the way and employment growth expected to cool to just a handful of positions, occupancy seems apt to drop slightly during 2009. But rent change should remain positive, translating to mild revenue increases (see chart). The District itself looks vulnerable to pockets of softness, Willett warns, partly because there’s quite a bit of shadow market stock available in the form of individually owned condos offered for rent. However, the metro’s suburban neighborhoods in Maryland and northern Virginia appear in solid shape, with substantial rent growth.In recently released rankings of year-to-year job growth, Maryland, Virginia and the District of Columbia are three of only six states (this report treats D.C. as a state) to add more than 10,000 jobs since October 2007, according to the U.S. Bureau of Labor Statistics (BLS). Through November 2007, jobs growth in Washington, D.C. was 40,400, a 1.3 percent gain.At the same time, the District of Columbia recorded over-the-month unemployment rate increases in October, the BLS report notes. Over the year, jobless rates were up in 47 states and the District of Columbia. Still, Washington, D.C. has a sturdy job market and a transient work force that has produced a large pool of Class A renters by choice, points out research from Delta Associates. Delta adds that the Washington metro area is the third-largest apartment market in the U.S., next to New York and Los Angeles.However, Delta Associates advisors warn that D.C’s strong apartment pipeline and the delivery of investor-owned condo units to the “shadow” rental market continue to impact net absorption. On the other hand, as a countervailing force, the recent credit crunch is making apartments a more viable housing option for many. Delta concludes. More stringent lending policies, coupled with continued high for-sale housing costs in the region, point to more optimistic expectations for the Washington apartment market. Over the last few years, more than 21,000 condominium units have been reprogrammed and added to the Class A apartment pipeline, according to Delta Associates data.