As has been the case for the last few quarters, there’s some good news and bad news for DC area landlords at the midway point for 2013.

In the positive column:

  • Strong Class A absorption levels and absorption pace per project* point to solid demand, despite an increasingly competitive marketplace.  The region’s development pipeline has plateaued and construction starts remain at more reasonable levels this quarter.
  • Rent growth is registered in most submarkets, although at much more modest rates than at earlier points in this cycle.
  • Concessions remain low, registering just 2.4% of face rents, compared to 1.9% one year ago.
  • The Class A stabilized vacancy rate declined from 4.6% last year at this time to 4% in June 2013.

However, there are two trends that portend a troubling intermediate future:

  • Rents have begun to markedly decline in over half of the region’s submarkets, particularly in those that are burdened with high levels of new supply.
  • The pipeline remains oversized compared to historic levels of demand.

In the long-term, the region’s apartment market prospects remain extremely bright, given lifestyle, economic, and demographic trends.

MID-YEAR 2013 HIGHLIGHTS 

  • Stabilized vacancy for investment grade apartments (Class A and B) is one of the lowest in the nation at 4%, up from 3.5% a year ago.
  • Rents for all investment grade apartments were down 8% over the past 12 months.
  • Class A rents declined by 8 % over the past year, down from the 3% growth posted at mid-year 2012.
  • Class B rents decreased by 8%. (For more information, please see Delta’s Washington Metropolitan Area Class B Apartment Market Report, available by subscription) (or do we even include the plug at all?
  • Annual Net Absorption, at 4,932 Class A and B apartments (97% of our long term average), edged up this quarter, but remained below the region’s long-term average.  This moderated absorption level is due to several factors including:
  • Increase in Class B vacancy from its extremely low vacancy rate of 2% one year ago to 4% at mid-year 2013.
  • Job growth has moderated since early 2011.

 

 

 

 

 

 

*Absorption = a measure of the total square feet leased in the market taking into consideration apartments vacated during that period