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Rents Drop at DC Area’s Class B Apartments as Vacancies Rise

by Lark Turner

Rents Drop at DC Area's Class B Apartments as Vacancies Rise: Figure 1
1500 Massachusetts Avenue NW

UrbanTurf has already projected that 2014 will be the year of the renter in the DC area. That’s because the number of new buildings going up in the region is catching up with (and in some cases surpassing) demand. That same increase in inventory is affecting rents in older buildings, which are expected to drop in the area this coming year, according to a new report.

The report, issued by real estate research firm Delta Associates, looks at changes in the Class B apartment market over the previous year. Class A apartments are typically large buildings built after 1991, with amenities like gyms, pools and more (UrbanTurf reported on the changes in the Class A market last week). Class B buildings are generally older buildings that have been renovated or have more limited amenities (privately rented homes aren’t included in the analysis).

Class B vacancies rose to 5.9 percent in 2013, up 1.8 percent from 2012, and DC rents decreased by 1.1 percent over the year. Northern Virginia rents also dipped by 1 percent, as suburban rents in Maryland rose by 1.5 percent.

Rents Drop at DC Area's Class B Apartments as Vacancies Rise: Figure 2
Courtesy of Delta Associates. Click to enlarge.

Those figures are in stark contrast to a 2012 third-quarter report, when UrbanTurf reported that finding a Class B apartment in DC could be a “virtually impossible” task.

Though the report projects that vacancy will stay under control through the year, it predicts a continuing downward trend in rents as more Class A units open up.

That’s good news for renters. Among other things, the nicer, newer Class A inventory should drive Class B properties to renovate and offer renters both more competitive rent and more amenities than they have in the past. The report noted:

  • More than 31,878 Class B apartments are currently being renovated.
  • The renovation budget averages $24,375 per unit.
  • Renting a renovated Class B apartment can still be a better deal than renting a new Class A apartment.

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

  • Upper Northwest: $2,018 a month
  • Mt. Vernon Square: $1,882 a month
  • Bethesda/Chevy Chase: $1,969 a month
  • Silver Spring: $1,629 a month
  • South Arlington: $1,442 a month
  • Falls Church/North Arlington: $1,856 a month
  • Crystal City: $2,035 a month

Delta Associates projects that the low rents and high vacancy will be “shallow and short-lived.” But in the meantime, the advantage goes to the renter this year.

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This article originally published at http://dc.urbanturf.com/articles/blog/rent_drops_slightly_in_districts_class_b_apartments_as_vacancy_rises/7992

9 Comments

  1. StanislausBabalistic said at 4:14 pm on Tuesday January 14, 2014:
    But what about average Class B rents in neighborhoods that people under the age of 50 actually want to live in? Those neighborhoods seem left off your list.
  1. Lark Turner said at 4:37 pm on Tuesday January 14, 2014:
    Hi Stanislaus, Thanks for your comment. We included a selection of the sub-markets analyzed by Delta. If there is a specific area you are interested in, let us know and we will try and respond in the comments if the data are available. Lark Turner
  1. StanislausBabalistic said at 5:08 pm on Tuesday January 14, 2014:
    Shaw, Logan Circle, Columbia Heights, U Street, Adams Morgan, Dupont Circle, NoMA, H Street, Gallery Place, Foggy Bottom, Petworth, Capitol Hill, Waterfront, Navy Yard, etc. Thanks.
  1. Lark Turner said at 5:15 pm on Tuesday January 14, 2014:
    Stanislaus, Unfortunately, the report does not get that granular in terms of neighborhood data, but we will reach out to the authors and see if we can get the data sets you are looking for. Thanks, Lark Turner
  1. Jp said at 3:13 pm on Wednesday January 15, 2014:
    Stanislaus, The prior reports indicated that rents in central DC (Logan Circle & Shaw) were stable, and the further out neighborhoods were getting hit the hardest. NOMA, Upper NW, Navy Yard, North Arlington, and Petworth had the largest drop in rents. I doubt much has changed since the last report. Also, not sure where you live, but North Arlington and Mt. Vernon Square are notorious post-grad 'hoods. Mt. Vernon Square is the idea sample neighborhood for these reports because it is centrally located in DC proper and there is a ton of development happening right now.
  1. Tom M said at 5:09 pm on Wednesday January 15, 2014:
    This tracks the rent actually charged for ALL UNITS rented or the rent charged on NEWLY rented units only? Second, does the data only report EFFICIENCY apartments? Is there reason to think that the rental market beyond efficiency apartment tracks that small segment of the market? And finally, is a reported 1% decline or so actually statistically significant? In other words, does the data density and quality support drawing such a conclusion? Thanks
  1. The Editors said at 5:39 pm on Wednesday January 15, 2014:
    Tom M, The report tracks newly rented units or available units for rent in Class B buildings. So, it doesn't take into account a lease signed six months ago, as that's not a good indicator of the current market. The report analyzes studios to 2-brs in buildings built prior to 1991. Yes, the data density supports drawing the conclusion of a 1% decline. 73,789 units were surveyed for the report which is about one-third of institutional Class B units in the region. Hope this helps. The Editors
  1. Non LTR said at 6:01 pm on Wednesday January 15, 2014:
    Any recent data on the correlation between average Class A/B rental rates and demand for home/apt purchases? I.e., degree to which dropping rental rates correlates with fewer people buying homes.
  1. Tom M said at 8:03 pm on Wednesday January 15, 2014:
    Sorry to be a data nerd. But a 1% decline is too "single point" and summary IMHO. It would be useful to see the distribution.

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