(Read more on the multifamily market.)
WASHINGTON, DC-A new report by Marcus & Millichap Real Estate Investment Services finds that multifamily property fundamentals remain vigorous throughout the DC metro area, and will keep the vacancy rate within the 4% range. Indeed, according to the report, the class B/C vacancy rate in 20 of the market's 36 submarkets is 4.5% or less, with several areas posting rates below 3%.
The stats, compiled in the firm's third-quarter Apartment Research Report, is welcome news to the multifamily community here, which had been bracing for a substantial vacancy increase this year to 6% or more, according to many projections and anecdotal musings. A 2% or more drop is significant because of the uncertainty in condo and multifamily markets here, Ramon Kochavi, regional manager of the Washington, DC, office of Marcus & Millichap tells GlobeSt.com.
"We had been expecting a glut of new multifamily products on the market because of all the condo projects that have gone bad," he says. "But absorption has not been an issue--the condo-turned-apartment units have been gobbled up by renters, which was a surprise."
This happy miscalculation was due to employment growth exceeding expectations. Total employment is forecast to expand 1.5%, or by 45,600 new hires. Ìeanwhile, asking rents metrowide are projected to climb 5% this year to $1,312 per month, and effective rents will advance 4.9% to $1,260 per month. Another positive metric, according to the report: the median price of properties sold has climbed 4% to $100,000 per unit.
There are still worrisome factors at play in the market. One reason Delta Associates found growth to be weaker in the multifamily sector is due to a higher than expected supply of alternative product in the market. This includes homeowners that have not been able to move their houses and condo owners that bought either to rent or to flip. There is also about 3,000 or so new units expected to deliver in the DC area in the mid term, which could nudge vacancy rates up a bit in the future, especially if the economy worsens.
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
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.
