(To read more on the multifamily market, click here.)
WASHINGTON, DC-Multifamily in the metropolitan area is enjoying a strong run as the housing market--particularly condos--starts to cool off and additional supply has not yet become available. However, Grant Montgomery, vice president of Delta Associates and author of a new report on the subject, believes these dynamics will shift as several multifamily construction projects are completed.
"There are 16 projects under construction and four in the initial lease up phase in Northern Virginia," he tells GlobeSt.com. "So while the market has taken notice of the huge demand for multifamily space, there will be a lag time until these projects will deliver."
Montgomery says demand is the highest it has ever been in this area. But supply, for various reasons, has been very tight. These reasons include the large number of multifamily buildings converted to condos and the decision by many builders to invest in condos instead of multifamily over the last few years. The result is an extremely low vacancy rate--1.7% compared to 2.4% a year ago--in both class A and class B markets combined. Meanwhile, rents have jumped significantly over the last year--by some 7% in class A and class B, and by 7.4% in class A. Other indicators also point to a tight rental market. For instance, Montgomery notes that concessions at high-rise luxury apartments are half of what they were a year ago.
Karen Kossow, assistant VP of sales and marketing for KSI Management Corp., tells GlobeSt.com that demand for class A space in the Reston, VA submarket is indeed very tight. The company has just begun lease advertising this week at its Metropolitan at Reston Town Center, a 288-unit high-rise luxury building. At $2.33 sf, the rental rates, she said, are higher by 50 cents to that of the nearest competing building. According to Kossow, KSI went back and forth deciding whether to market condos or apartments. "We decided to move forward as an apartment community, in the end. We felt demand was clearly there."
KSI also began construction of Phase 1 of Gramercy at Metropolitan Park in Pentagon City. The eight-building project, the first phase of which is expected to be delivered in June 2007, will offer 25,000 units all together. Once that is complete, KSI will have 5,000 units in the Washington area market.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
