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Tips and insights for DC area renters, landlords, and real estate watchers.

July 2013 Rent Check

Posted on August 6th, 2013

Last week, we shared some exciting news in the July issue of our newsletter, Rent Check. In our DC version, we announced our new biweekly column in ARLnow, Rental Report. We highlighted our new Manager of Operations, Jessica Ruck, in our Philly newsletter. As always, we shared the rental market ins and outs as reported by our friends at Delta Associates. We hope you enjoy both newsletters!

2013 Q1 Philly Apartment Market Highlights by Delta Associates

Posted on April 24th, 2013

  • The Philadelphia metro area’s stabilized Class A vacancy rate stands at 3.9% – 110 basis points higher than the 2.8% rate registered at this time last year. Vacancy increased over the year in the suburbs of Pennsylvania, New Jersey, and Center City. Suburban Pennsylvania vacancy is up 90 basis points compared to March 2012, at 4.1%. Vacancy in Southern New Jersey, at 4.7%, rose by 110 basis points from 3.6% at March 2013. Vacancy in Center City is up 120 basis points to 2.9%.
  • The substate areas of Southern New Jersey and Suburban Pennsylvania experienced healthy rent conditions, showing overall rent growth in the suburbs of 2.5% over the year with average effective rents at $1,412. Rents in Center City performed well, with an increase of 0.9% since last year at this time. Rent growth in Suburban Pennsylvania was 2.5% since 1st quarter 2012, while Southern New Jersey rents grew by 2.4% over the same period. Effective rents across the entire Philadelphia metro area grew by 2.0% over the past year.
  • For the metro as a whole, average effective rental rates are $1,615 ($1.61 per SF). Center City effective rents average $2,140 ($2.17 per SF) vs. $1,412 ($1.40 per SF) in the suburbs.
  • Limited supply in recent quarters has led to healthy rent growth and low vacancy in the Center City Philadelphia. Despite this healthy performance, the number of units under construction is significant, and as a result, we project that the 36-month supply will slightly exceed the number of units that will be absorbed in the Center City area by the end of our 36-month forecast period. There are currently about 2,800 units under construction or planned that may deliver in the next 36 months in Center City Philadelphia. Philadelphia’s supply/demand relationship indicates that vacancy will continue to edge up slightly and rent growth is likely to moderate over the next 24 months. Notwithstanding this trend, we expect Center City to remain a healthy market.

Pennsylvania Suburbs

  • Effective rents in this area are up by 2.5% when compared to rents in the 1st quarter of 2012. Stabilized vacancy is currently 4.1% compared to last year’s level at 3.2%. Concessions have dropped over the last year, from 2.5% of asking rent in the 1st quarter of 2012 to 1.5% in the current quarter. Effective rents in Montgomery County are up 4.1% over the year while Chester and Delaware Counties experienced an increase of 2.2%. Stabilized vacancy is currently the highest in Montgomery County at 4.5%. Stabilized vacancy in Bucks County is 3.9% and Chester and Delaware Counties have a vacancy rate of 3.8% at March 2013

Urban Igloo Capitol Hill Office Opens Doors

Posted on April 24th, 2013

We are thrilled to announce the opening of our third office on Stanton Park, in the Capitol Hill neighborhood of DC. This 426 C Street NE location is our second office in the District, with another location serving Philadelphia, PA.

“Capitol Hill remains a strong rental market due to its highly transient population,” reports Rick Gersten, our CEO and President, and “the statistics support our expansion.”

In a neighborhood known for its political stature, Urban Igloo aims to assist the renters and landlords who fluctuate with the elections. We also strive to help Capitol Hill’s strong nonpolitical population that contributes the cultural fabric of the community.

Read more about our opening in our press release.

 

2013 Q1 DC Apartment Market Highlights by Delta Associates

Posted on April 24th, 2013

There is a mix of good news and troubling trends for DC area landlords as we begin 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 are back down to more reasonable levels this quarter.
  • Rent growth is registered in most submarkets, albeit at much more modest rates than at earlier points in this cycle.
  • Concessions remain low, registering just 2.8% of face rents, compared to 2.6% one year ago.
  • The Class A stabilized vacancy rate declined from 5.1% last year at this time to 4.9% in March 2013.

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

  • Rents have begun to markedly decline in several submarkets, particularly in those that are burdened with high levels of new supply.
  • The pipeline remains oversized compared to historic levels of demand.
  • And the future of our regional economy, in light of Federal austerity measures, remains a large question mark.

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

FIRST QUARTER 2013 HIGHLIGHTS

  • Stabilized vacancy for investment grade apartments (Class A and B) is one of the lowest in the nation at 4.7%, up from 3.8% a year ago.
  • Rents for all investment grade apartments were up 0.7% over the past 12 months.
  • Class A rents rose by 0.6 % over the past year, down from the 2.3% growth posted at first quarter 2012.
  • Class B rents increased by 0.1%.
  • Annual Net Absorption, at 1,965 Class A and B apartments (39% of our long term average), edged up this quarter, but remained well 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 2.2% one year ago to 4.4% at first quarter 2013.
    • Job growth has moderated since early 2011.
    • However, Washington recorded 6,645 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.
  • As predicted by Delta Associates, and demonstrated by the latest U.S. Census Bureau data, the structural shift toward renting appears to have played out in the Washington area. This trend is further illustrated by Washington’s nation-leading for-sale housing market performance. Absorption over the next 36 months may be somewhat higher than the region’s long-term average of 5,095 units per annum. This projection is predicated upon the “de-nesting” and “un-coupling” of potential renters currently living with parents or roommates, and improved job growth and reduced uncertainty in the region over the intermediate term.
  • Average monthly absorption at new projects ticked up over the past 12 months from 15 to 16 units per project per month.  This pace bodes well for projects delivering in 2013, as the number of projects in lease-up begins to climb. The number of projects in lease-up has increased from 23 to 45 over the past 12 months and there are more to come in the period ahead.
  • Concessions at Class A projects ticked up slightly due to the large increase posted in Northern Virginia. While still extremely low, overall concessions increased slightly to 2.8% of face rent at first quarter 2013 compared to 2.6% one year earlier. Over the past year concessions for projects in initial lease-up increased from 6.9% to 8.3%, driven by a particularly large increase for projects in Suburban Maryland.
  • The development pipeline reached a cyclical low of 16,606 as of year-end 2009. Since then improving market fundamentals and improving financing pushed the pipeline to 34,449 units at year-end 2011. At first quarter 2013, the number stands at 35,802 as production moderated over the past two quarters. This pause has occurred before during this development cycle, only to be followed by record setting levels of ground breakings. Future quarters will demonstrate whether the market continues to discount the threat of overbuilding. Starts eased this quarter with 2,671 units breaking ground this quarter compared to 2,518 in fourth quarter 2012.

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

Q4 Philly Apartment Market Highlights by Delta Associates

Posted on January 30th, 2013

Vacancy Remains Low But Inches Up, Causing Slight Decline in Rent

  • The Philadelphia metro area’s stabilized Class A (luxury) vacancy rate stands at 3.8% – 190 basis points higher than the 1.9% rate registered at this time last year.
  • Vacancy increased over the year in the suburbs of Pennsylvania, New Jersey, and Center City. Suburban Pennsylvania vacancy is up 130 basis points compared to December 2011, at 3.7%.
  • Vacancy in Southern New Jersey, at 4.2%, rose by 30 basis points from 3.9% at year-end 2011. Vacancy in Center City is up 190 basis points to 3.7%.
  • The substate areas of Southern New Jersey and Suburban Pennsylvania experienced deteriorated rent conditions, showing overall rent change in the suburbs of negative 1.1% over the year with average effective rents at $1,389.
  • Rents in Center City performed slightly better, with an increase of 0.2% since last year at this time.
  • Rent change in Suburban Pennsylvania was negative 1.3% since year-end 2011, and Southern New Jersey decreased by 0.6% over the same period.
  • Effective rents across the entire Philadelphia metro are at negative 0.7% over the past year.
  • For the metro as a whole: Average effective rental rates are $1,593. Center City effective rents average $2,146 ($2.19 per SF) vs. $1,389 ($1.38 per SF) in the suburbs.
  • Limited job growth and a limited supply in recent quarters have led to healthy rent growth and low vacancy in the Center City Philadelphia. Despite this healthy performance, the number of units under construction is significant, and as a result, we project that the 36-month supply will slightly exceed the number of units that will be absorbed in the Center City area by the end of our 36-month forecast period. There are currently about 2,700 units under construction or planned that may deliver in the next 36 months in Center City Philadelphia. Philadelphia’s supply/demand relationship indicates that vacancy will continue to edge up slightly and rent growth is likely to moderate over the next 24 months.

Pennsylvania Suburbs:

  • Effective rents in this area are down by 1.3% when compared to rents in the fourth quarter of 2011.
  • Stabilized vacancy is currently 3.7% compared to last year’s level at 2.4%.
  • Concessions have dropped slightly over the last year, from 1.3% of asking rent in the fourth quarter of 2011 to 1.1% in the current quarter.
  • Effective rents in Montgomery County are up 1.1% over the year while Chester and Delaware Counties experienced a decrease of 1.2%.
  • Vacancy is currently the highest in Montgomery County at 4.4%. Vacancy is currently the lowest in Bucks County at 2.9% and Chester and Delaware Counties have a vacancy rate of just 1.5% at the end of 2012.

Q4 DC Apartment Market Highlights by Delta Associates

Posted on January 30th, 2013

If you’re a Washington DC area landlord, there is a mix of good news and troubling trends in the apartment market as we closed out 2012.

In the positive column:

  • Class A absorption* levels and absorption pace per project despite an increasingly competitive marketplace point to solid demand.
  • The region’s development pipeline has plateaued and construction starts are back down to more reasonable levels this quarter.
  • Rents continue to increase in most submarkets, albeit at much more modest rates than at earlier points in this cycle.
  • The Class A (luxury) stabilized vacancy rate declined from 5.0% last year at this time to 4.2% in December 2012.

However, there are troubling trends for rental owners and landlords:

  • Rents have begun to markedly decline in several submarkets, particularly in those that are burdened with high levels of new supply.
  • The pipeline of new apartment projects remains oversized compared to projected demand.
  • And the future of our regional economy, in light of Federal austerity measures, remains a large question mark.

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

Year-End 2012 Highlights

  • Stabilized vacancy for investment grade apartments (Class A and B) is one of the lowest in the nation at 4.3%, up from 3.8% a year ago.
  • Rents for all investment grade apartments were up 1.7% during 2012. Class A rents rose by 1.9% over the past year, down from the 2.4% growth posted in 2011.
  • Annual Net Absorption, at 360 Class A and B apartments (7% of our long term average), declined significantly this quarter, measuring well below the region’s long-term average. This reduction is due to an increase in Class B vacancy, moderating job growth and a flattening of the trend toward renting vs. owning in the Washington metro area.  However, the Class A market absorbed 5,073 units.
  • Concessions at Class A projects halted their declines for the first time since first quarter 2010. At year-end 2012, concessions increased slightly to 2.7% of face rent compared to 2.6% of face rent at year-end 2011.
  • The development pipeline reached a cyclical low of 16,606 as of year-end 2009. Since then improving market fundamentals and improving development prospects have pushed the pipeline to 34,449 units at year-end 2011. At year-end 2012, the number stands at 35,767, as the market seemed to discount the threat of overbuilding.
  • Construction starts eased this quarter with 2,518 units breaking ground, compared to 6,205 units in third quarter 2012. As job growth has moderated and deliveries are expected to accelerate during 2013 into 2014, market fundamentals will likely ease as well.

 

 

 

 

 

 

 

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

Q3 DC Apartment Market Highlights by Delta Associates

Posted on October 30th, 2012

In the short run, the good news continues.  Over the past year rents are up and concessions are holding steady. Class A vacancy is nation-pacing and per project absorption* is up, in spite of an uptick in the number of newly minted units vying for attention. But with the drought of units built in 2009, and solid performance metrics in 2010, 2011 brought record-setting starts as the market turned around. Therefore, 2013 and 2014 will see a return to a more competitive market due to subdued absorption coupled with the delivery of a large slate of projects. Once again, we are reminded that commercial real estate moves in cycles!

  • In the past 12 months, over 18,000 units have broken ground and over 10,700 new units are expected to deliver over the next year.
  • Annualized Class A absorption of approximately 5,000 units is 10% off the region’s long-term average, easing the structural shift from owning to renting levels off in the Washington region and moderate job growth continues.

Third Quarter 2012 Highlights

  • Stabilized vacancy for investment grade apartments (Class A and B) is 3.8%, up from 2.8% a year ago. With the national rate at 4.8%, Washington has the second lowest vacancy of any major metro area in the nation, behind only New York.
  • Rents for all investment grade apartments were up 2.7% over the past 12 months. Class A rents rose by 3.6% over the past year, the same increase posted during the preceding 12 months.
  • Annual Net Absorption*, at 583 Class A and B apartments (11% of our long term average), declined significantly this quarter, measuring well below the region’s long-term average. This reduction is due to an increase in Class B vacancy, moderating job growth, flattening of the trend toward renting vs. owning in the Washington metro area.   However, the Class A market absorbed 5,023 units.
  • Concessions at Class A projects halted their declines of the first time since the first quarter of 2010. At third quarter 2012, concessions increased slightly to 2.1% of face rent compared to 2.0% of face rent at one year earlier.
  • The development pipeline reached a cyclical low of 16,606 as of year-end 2009. Since then improving market fundamentals and improving development prospects have pushed the pipeline to 34,449 units at year-end 2011.  At third quarter 2012, the number increased again to 36,564, as the market seemed to discount the threat of overbuilding.
  • Construction starts ballooned again this quarter with 6,205 units breaking ground, compared to 1,976 units in second quarter 2012.  As job growth has moderated and deliveries are expected to accelerate during 2013 into 2014, market fundamentals will likely ease as well.

*Annual net absorption = a measure of the total square feet leased in the market over a year taking into consideration  space vacated during that year.

Mid-Year Philly Apartment Market Highlights by Delta Associates

Posted on August 29th, 2012

The Philadelphia metro area’s stabilized Class A* vacancy rate stands at only 2.3% – 40 basis points higher than the 1.9% rate registered at this time last year. Vacancy increased over the year in the suburbs of both Pennsylvania and New Jersey, and Center City vacancy has also increased slightly from last year at this time.

Suburban Pennsylvania vacancy is up 50 basis points compared to June 2011, at 2.4%. Vacancy in Southern New Jersey, at 3.3%, rose by 110 basis points from 2.2% at the end of second quarter 2011. Vacancy in Center City is up 10 basis points to 1.6%.

The substate areas of Southern New Jersey and Suburban Pennsylvania experienced mixed rent conditions, showing overall rent change in the suburbs of 0.2% over the year with average effective rents at $1,414. Rents in Center City performed the worst overall, with a decrease of 1.0% since last year at this time.

Rent change in Suburban Pennsylvania was nearly flat at negative 0.1% since second quarter 2011, and Southern New Jersey increased by 0.9% over the same period. Effective rents across the entire Philadelphia metro are essentially flat at negative 0.1% over the past year.

For the metro as a whole: Average effective rental rates are $1,606. Center City effective rents average $2,179 ($2.17 per SF) vs. $1,414 ($1.40 per SF) in the suburbs.

*Class A units are defined as luxury units that are usually less than ten years old, are generally located in highly desirable geographic areas, and can garner high rents.

 

 

Mid-Year DC Apartment Market Highlights by Delta Associates

Posted on August 29th, 2012

Stabilized vacancy for investment grade apartments (Class A and B*) is nation-pacing at 3.5%, up only slightly from a year ago.  With the national rate at 5.4%, Washington has the third lowest vacancy of any major metro area in the nation, behind only Philadelphia and New York.

Rents for all investment grade apartments were up 2.5% for the 12 months ending June 2012.  Class A rents rose 3.0% over the past year, compared to an increase of 5.6% during the preceding year.

Annual Net Absorption, at 3,580 Class A and B apartments (65% of our long term average), continues to measure well below the region’s long-term average.  The Class A market absorbed 3,851 units over the past 12 months.

Concessions at Class A projects edged lower, following a pattern first seen in this cycle in the first quarter of 2010.  At mid-year 2012, concessions were 1.9% of face rent compared to 2.9% at mid-year 2011.

The development pipeline reached a cyclical low of 16,606 as of year-end 2009.  Since then improving market fundamentals and financing pushed the pipeline to 34,449 units at year-end 2011.  At mid-year 2012, the number declined slightly to 32,612 as the market became aware of the threat of overbuilding.  Starts slowed with 1,976 units breaking ground this quarter compared to 3,684 in the first quarter of 2012.

In 2011, construction came roaring back with 14,827 units breaking ground – the highest recorded by Delta in 18 years.  An additional 3,684 units in 15 projects began construction in the first quarter of 2012.  Lenders have begun to tighten access to credit, slowing construction starts this quarter to eight projects containing 1,976 units.  This trend will likely continue in the second half of 2012.

*Class A units are defined as luxury units that are usually less than ten years old, are generally located in highly desirable geographic areas, and can garner high rents.

Class B units are usually 10-25 years old  and are well-maintained.

 

 

 

Latest Rent Check: New Ad Campaign, JBG Interview & Logan Circle

Posted on April 26th, 2012

The April/May issue of Rent Check has hit inboxes across the DC area!