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DC Area Rents Drop 3% As New Apartment Supply Rises

by UrbanTurf Staff

DC Area Rents Drop 3% As New Apartment Supply Rises: Figure 1
The Shay, a 245-unit apartment project planned in DC.

A report out today from Delta Associates analyzing the regional apartment market in the fourth quarter of 2013 reveals that rents for Class A apartments (large buildings built after 1991, with full amenity packages) in the DC area dropped 3 percent last year, a clear sign that the supply of new apartments is catching up to demand in the area.

Class A rents fell year-over-year by about a percentage point in upper NW DC and also dropped in the Rosslyn-Ballston Corridor (-2.4%) and Silver Spring (-6.8%) Rents did not fall everywhere, however. In DC proper, rents actually rose by 0.8 percent despite the large number of new apartments delivering, thanks to a continued high level of demand. In the NoMa/H Street sub-market, rents increased 3.9 percent.

DC Area Rents Drop 3% As New Apartment Supply Rises: Figure 2
Courtesy of Delta Associates. Click to enlarge.

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

  • Central: (Penn Quarter, Logan Circle, Dupont Circle, etc.) $2,822 a month
  • Upper Northwest: $2,648 a month
  • Columbia Heights/Shaw: $2,480 a month
  • NoMa/H Street: $2,295 a month
  • Alexandria: $1,955 a month
  • Rosslyn-Ballston: $2,337 a month
  • Tysons Corner: $1,746 a month
  • Bethesda: $2,580 a month

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

There are a number of reasons that rents are now falling, but primarily it is due to high levels of new supply and a pipeline that now seems oversized compared with demand. For loyal UrbanTurf readers this should not come as surprise. In 2012, we reported that the delivery of new apartment projects (and resulting increase in vacancies) will put downward pressure on rents.

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/dc_area_rents_drop_3_as_new_apartment_supply_rises/7979

9 Comments

  1. B C said at 3:41 am on Friday January 10, 2014:
    Can you also report on the trends in Delta's Class B report? Thanks!
  1. h st ll said at 5:12 pm on Friday January 10, 2014:
    Interesting that H St/NOMA has seemingly been able to absorb all the new inventory and is now back to increases (after some recent decreases).
  1. J said at 6:47 pm on Friday January 10, 2014:
    I don't see on the chart where it shows that DC area rents have decreased by 3%...It actually shows a 0.8% increase in rents in the District...can you explain?
  1. The Editors said at 6:52 pm on Friday January 10, 2014:
    J, That statistic is not included in the chart featured in the article, but the report does state that Class A DC area rents dropped by 3%. In DC proper (meaning just Washington, DC), rents rose by 0.8%. Hope that answers your question. The Editors
  1. The Editors said at 6:53 pm on Friday January 10, 2014:
    B C, Yes, we will be reporting on the Class B market next week. The Editors
  1. RL said at 9:07 pm on Friday January 10, 2014:
    The inventory of new, Class A apartments has just started to be delivered. Beginning later this year and into 2015, the bulk of the new rental units will be delivered and at that time, the market will likely see more significant rent decreases and concessions. The information in the Delta reports has never been real accurate when showing the supply/demand ratio for rental apartments. The fact is that DC has one of the largest pipelines of new apartments as compared to any other major metro area. Most of the institutional equity has vacated the DC Class A, multifamily development focus until this huge supply begins to show that it is being absorbed and occupied. Good for the renters. Bad for the investors of these new projects, at least for now. In time, DC will rebound from this over-supply and regain its top ranking as a great place to invest in Class A mulitifamily rental housing, but it will take a few years.
  1. mona said at 9:37 pm on Friday January 10, 2014:
    Were do private home rental and basement apartment rentals fall? Class A, B or do they get counted at all? Are the rents for these higher or lower?
  1. James said at 2:30 pm on Saturday January 11, 2014:
    Tysons Corner is cheap cheap cheap!
  1. Mark Wellborn said at 10:28 pm on Sunday January 12, 2014:
    mona, Home rentals and basement apartments are not analyzed as part of the Delta reports. The Editors

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