The Washington D.C. metropolitan area multifamily market continued its hot streak in the first quarter of 2014. The region absorbed over 2,300 units in the first quarter –already more than a third of the total units absorbed during 2013 which was a near-record year. As had been anticipated, deliveries in the first quarter were at an all-time high of over 3,500 units. The market’s continued health is evident in that only four of the region’s 26 submarkets posted very modest negative absorption during the first quarter, and none of those submarkets delivered new units over the same period. Thus, any negative gains were not the result of oversupply. Asking rental rates averaged $1,531 in the first quarter, a 0.9% increase from year-end 2013. With the exception of a slight dip in the fourth quarter of 2013, rents have been increasing steadily for the past two years at an average rate of 0.6% per quarter.
Despite strong absorption numbers, vacancy rates rose across the metro area. The region’s overall vacancy rate ticked up 0.3 percentage points to 4.2%. The uptick in vacancy is almost wholly attributed to the astounding amount of new units coming online, but since the deliveries are still in lease-up stage this is not all that alarming. What may be worrisome is that there are many more deliveries to come, so it remains to be seen if oversupply will cause a drag on the market through the remainder of 2014. However, it is indeed a good sign that the market has, for the most part, kept pace with deliveries thus far.
It’s nearly impossible to go anywhere in the Washington DC Metro region without seeing a crane. Nearly 14,000 multifamily units are projected to come online in the region by year-end. In the wake of the new product coming online, vacancy will surely rise, but perhaps not as significantly as some have feared. There has been much concern about overbuilding in the region’s multifamily market, but the area’s strong population growth continues. Additionally, there is likely some pent-up demand from millennials who have recently joined the workforce but are still living with parents. As the economy continues to improve, many of them will move out on their own and into multifamily product.
By: Nathan Edwards
Email Nathan: Nathan.Edwards@cassidyturley.com
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