Rents Up and Vacancy Down in DC Area's Increasingly Competitive Class B Market

• April 15th 2015

by Lark Turner

An increasingly competitive Class B market is outperforming the more-expensive Class A market, according to a Delta Associates report.

Rents in Class B low-, medium- and high-rise apartments rose 1.9 percent year-over-year across the DC metro area. They were up 0.5 percent in suburban Maryland, 2.9 percent in Northern Virginia and 2.1 percent in DC proper. Even as rents rose, vacancy went down to 3.4 percent, 170 basis points lower than last year. And at 3,781 units, absorption in Class B apartments was nine times the five-year annual average of 420 units, Delta reported.

There are three big forces that may affect vacancy and rents in 2015, according to Delta. First, the DC jobs market is growing, particularly for lower-wage workers who are looking for affordable apartments. Second, a huge number of class A apartments continues to be delivered in the DC area. That increases competition among class A rents and may eventually drive class B rents down. (Check out our recent post on Class A apartments for more.) And the final factor to watch is home prices, per Delta:

House prices in the Washington metro area increased 4.0% in 2014. High home prices force many people in the area to rent instead of buy. The share of renter households has increased substantially in the Washington region over the past few years, and we expect this trend to continue.

Here’s a look at average rents for high-rise Class B apartments in certain Delta-defined submarkets:

* Upper Northwest: $2,126 a month
* Mt. Vernon Square: $1,955 a month
* Bethesda/Chevy Chase: $2,021 a month
* Silver Spring: $1,648 a month
* South Arlington: $1,551 a month
* Falls Church/North Arlington: $2,060 a month
* Crystal City: $2,053 a month

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

This article originally published at https://dc.urbanturf.com/articles/blog/rents_up_and_vacancy_down_in_dc_areas_increasingly_competitive_class_b_mark/9769.