Class A Apartment Absorption Dropped Off in the DC Area in the Final Quarter of 2016

• January 26, 2017
• 2 Comments

by Nena Perry-Brown

A new rental building at 5333 Connecticut Avenue NW.

Last October, UrbanTurf noted that Class A apartment absorption was still going strong in the DC region but was showing signs of slowing. A new report from Delta Associates indicates that this slowdown is underway, with absorption dropping off in late-2016 after seven consecutive quarters of growth.

“While job growth is strong and supply remains plentiful, the wave of new Millennial households that helped the region absorb a record 13,429 apartments in calendar year 2015 appears to be slowly subsiding,” the report explains. “Between now and 2019, the vacancy rate likely will rise to nearly 5% as the level of deliveries remains elevated in the short term.”

Overall, annual absorption in DC proper was down 25 percent compared to the year before, but increased in the Upper NW (22%), Capitol Hill/Riverfront/SW (43%) and Northeast (52%) sub-markets. Rents were also up in all except one DC submarket (Upper Georgia Avenue); however, this is expected to be kept in check by the projected delivery of over 10,000 apartment units over the next two years.

The drop in absorption is in line with reports in a Washington Post article from late-2016 that the flood of young professionals to the city is slowing.

“Washington saw a net increase of roughly 2,300 new residents from other states between July 2015 and July 2016, the Census Bureau reported in its year-end population estimates,” the Post article stated. “The figure marked a steep drop-off from five years ago, when net migration to the city from other parts of the United States exceeded 7,000.”

Here is a quick snapshot of average rents for high-rise Class A apartments in DC area sub-markets, as defined by Delta:

• Alexandria: $2,137 per month
• Central (Penn Quarter, Logan Circle, Dupont Circle, etc.): $2,883 per month
• Upper Northwest: $2,835 per month
• Columbia Heights/Shaw: $2,718 per month
• NoMa/H Street: $2,380 per month
• Capitol Hill/Capitol Riverfront: $2,346 per month
• Rosslyn-Ballston Corridor: $2,305 per month
• Silver Spring/Wheaton: $1,936 per month
• Bethesda: $2,605 per month
• Upper Georgia Avenue: $2,139 per month

Note: The rents are an average of studios, one and two-bedroom rental rates at new buildings in the DC area.

Definitions:

Class A apartments are typically large buildings built after 1991, with full amenity packages. Class B buildings are generally older buildings that have been renovated and/or have more limited amenity packages.

This article originally published at http://dc.urbanturf.com/articles/blog/class_a_apartment_absorption_dropped_off_in_the_final_quarter_of_2016/12075

2 Comments

1. househunter said at 2:25 pm on Friday January 27, 2017:
   This is consistent with what we experienced as landlords, with our row house. In 2015, we had no problem renting out the house (near NoMA) for $2500. Two years later, when it turned over, at the same time of year, it took several months to fill and we ended up dropping the rent several hundred dollars just to get someone in.

1. throwsatfeet said at 6:12 pm on Friday January 27, 2017:
   ^ makes sense. There is now an adequate supply of apartments in more desirable locations. $2,500 is a pretty solid budget to buy a condo in a central neighborhood as well.