Apartment Stock Poised to Rise in 2014
- Jan 17, 2014
Apartment performance in the Greater Washington, D.C. area could lag this year, as the booming construction hits right at a time when the metro’s job market is cooling down. Marcus & Millichap Real Estate Investment Services anticipates that the region’s apartment stock will rise 3.4% in 2014. It will result in vacancy levels not seen since 2009.
Apartment completions approached record levels last year, as developers delivered around 10,000 units in the region, increasing apartment stock by 1.9%. Marcus & Millichap expects builders to surpass this number in 2014, and deliver an impressive 18,000 units. An important number of large apartment projects is currently under construction in the Greater Washington, D.C. area. Multi-Housing News Online covered some of these stories. You can read about Pentagon City’s 700-unit Metropolitan Park development, the 310-unit Fenwick Station project in Silver Springs, Alexandria’s 360-unit Landmark Gateway, the 600 units coming to Bethesda, the 245-unit Shay in D.C.’s Shaw neighborhood, or the 304-unit Alta Liberty Mill project in Germantown.
The elevated construction and federal spending cuts caused the Washington, D.C. metro area to slide to number 27 on Marcus & Millichap’s 2014 National Apartment Index (NAI) Rank, down 10 places from 2013, the largest index decline. Marcus & Millichap anticipates that employers will add 58,100 jobs in 2014, an annual increase of 1.9%. In spite of this, the region’s vacancy will rise to 5.9%, an annual increase of 80 basis points. Meanwhile, rent growth will slow down to 2% this year, from 2.6% in 2013, leading to an average rent of $1,590 per month.
Over the next two years, the apartment market could, however, see some demand spill over from the tight condo market. Currently, most condo projects have less than 50 units and are unable to meet the growing demand for housing. As would-be owners wait for new projects to show up, some larger Class A apartment developments may be converted to condos, lessening the impact on apartment operations and meeting the demands of the for-sale condo market.
The Washington, D.C. metro area has been very active in 2013, with many apartment communities changing hands in multimillion dollar deals (The District, Woodvale Apartments, Virginia Village, Huntington Point, Grayson Flats, Rolling Brook Village are just some of them). And it will continue on the same path this year, as both local and out-of-town investors will look for properties in the region. However, the large number or properties under construction will have many large investors holding back and waiting to see how the market plays out.
Charts courtesy of Marcus & Millichap Real Estate Investment Services.