Performance metrics for the Washington apartment market are mixed at third quarter 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.
- Concessions remain low, registering just 2.4% of face rents, compared with 2.1% one year ago.
- The Class A stabilized vacancy rate is 3.9%, unchanged from September 2012.
However, there are several trends that portend a challenging intermediate future:
- Rents declined, albeit modestly, in nearly two-thirds of the region’s submarkets, particularly in those burdened with high levels of new supply.
- The pipeline remains oversized compared with historic levels of demand.
- Construction starts increased again this quarter, even while supply overhang is a concern.
In the long term, the region’s apartment market prospects remain extremely bright, given lifestyle, economic, and demographic trends.
THIRD QUARTER 2013 HIGHLIGHTS
- Stabilized vacancy for investment-grade apartments (Class A and B) is one of the lowest in the nation, at 4.1%, up from 3.8% a year ago.
- Rents for all investment-grade apartments were down 1.1% over the past 12 months. Class A rents declined by 0.9% over the past year, down from the 2.7% growth posted at third quarter 2012. Class B rents decreased by 0.6%.
- Annual Net Absorption, at 6,493 Class A and B apartments (127% of our long-term average), edged up this quarter, as disabsorption of Class B units slowed and Class A absorption continued its recent surge. Washington recorded 8,109 Class A units absorbed over the past 12 months, as the trend toward renting vs. owning appears to have resumed its upward trend in the Washington metro area in 2012.
