The apartment industry in our nation’s capital continues to grow and outperform many of its peer markets. According to Radix data, as of May 2023, all major operating fundamentals are outperforming the national average on an absolute basis as well as key week-over-week and year-over-year comparisons. While some Gateway markets, especially on the west coast, continue to struggle to regain their form in the wake of COVID-19, Washington D.C. has done very well from a multifamily perspective. Growth is taking place across the metro, within the District as well as in suburban Maryland and Northern Virginia. The Washington D.C. metro maintains an active construction pipeline, but development activity is well balanced geographically and the steady pace of deliveries has allowed absorption of new supply at a reasonable pace. As the metro continues to diversify its employment base and data and technology industries grow, Washington D.C. apartments should enjoy continued success in the coming years.
Traffic and Leasing
Inner ring suburbs in Maryland and Northern Virginia are attracting the most traffic in the metro. The District Heights submarket just east of Washington D.C. leads all submarkets with roughly 20 tours per property per week. Anacostia/Northeast D.C. and Pentagon City/Crystal City submarkets also have strong traffic and are attracting nearly 15 tours per week. The development of Amazon’s second headquarters in Crystal City is nearing completion and has had a tremendous impact on the submarket. The tech giant’s campus will employ 12,500 people upon opening and the company plans to grow its workforce footprint to roughly 25,000 by 2030.
Leasing activity is also strong across the metro, with 16 submarkets averaging more than 3 new leases signed per week. Landover, Rosslyn/Ballston, and College Park lead the metro in monthly growth for new leases signed with each submarket averaging 1.5 additional new leases per week than compared to mid-April.
Occupancy is highest in Rosslyn/Ballston and Old Town, two submarkets in Northern Virginia, with close proximity to the District. Not only do they maintain the strongest occupancy rates in the metro, but they have also performed well on an annual basis (something very few locations nationwide can boast). Year-over-year occupancy is up 103 basis points and 88 basis points respectively in Old Town and Rosslyn/Ballston.
Across the metro, properties are averaging 19 units available for rent, in line with the national average. Old Town has some of the highest occupancy, as well as the lowest ATR market-wide.
While the average rent in Washington D.C is roughly 15% above the national average rent, it ranks as the most affordable Gateway market in the country. Average rents in the D.C. metro are $2,188 per month. The most expensive rents are in College Park, MD as well as the Rosslyn/Ballston and Capitol Hill submarkets, where rents average $2,800 per month and up.
The fastest growing rents, however, are located in submarkets further from the urban core including Forest Heights/Oxon Hill, Fredericksburg City, and Kensington/Wheaton. Suburban demand remains strong as net effective rents have jumped more than 3% in each of these submarkets over the past month.
Like most markets across the country, NER growth has been strongest in studio and one-bedroom apartments. Studio rents are up 4.4% year-over-year in Washington. Loudoun County, home to the largest concentration of data centers in the U.S., has seen studio rents increase 24% in the past 12 months. Overall rents are up nearly 5% in the submarket. The data industry has grown exponentially as technology and data firms demand seamless connectivity and ample data center storage capacity. Northern Virginia has become a key hub in this international industry, and the continued reliance on data infrastructure will likely keep demand for housing in the area high.
Concessions are improving across the metro, as only a handful of submarkets have seen concessions rise in the past month. Submarkets including Gaithersburg/Germantown, Loudoun County, and Dupont Circle/Adams Morgan have had concessions drop by 50% or more since April.
Despite the nuances and added complexities of having three separate states or districts represented in the same MSA, the new supply pipeline in Washington D.C. has always been robust; especially when compared to other Gateway markets. New development remains fairly balanced between suburban Maryland, trendy parts of the northeast quadrant of the District, and Northern Virginia.
There are currently 133 projects under construction across the metro and limited active new supply has allowed property fundamentals to continue to grow.
However, more than 444 projects are currently in various planning stages and have yet to break ground. Given the recent changes in interest rates, many of these projects will not come to fruition. Nonetheless, a robust planning pipeline indicates new supply will remain steady in Washington D.C. for the foreseeable future. Given the continued demand for housing, Washington D.C. ranks among the most balanced metros for multifamily supply and demand.
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