There are many class A buildings in the pipeline that are close to delivery, he explains, and the vacancy rate for class A is nudging up as a result. Landlords are also more willing to grant concessions for Class A buildings as fundamentals for this particular product grow softer, Zupancic adds.

Meanwhile, Class B properties that are transit friendly are doing very well. “There is a huge investor interest in Class B properties now in this part of the District,” he says.

A Market By Market Story

To be sure, the trend Zupancic and Fitzgerald are describing is not necessarily reflective of the larger Washington DC area apartment market — or even the District.

It is true that oncoming supply has been above 30,000 units since 2011 and rent growth has been below-average for at least the same amount of time, according to Delta Associates' fourth quarter overview of the apartment sector in Washington DC. Despite this, Delta Associates said vacancy is about the same as a year ago and rent growth in the District remains strong compared to the suburbs. It did note, though, that vacancy is on the rise.

That said, the December 2016 vacancy rate for stabilized Class A apartments in the Washington metro area is down 10 basis points from a year ago to 4.5%.

But the District, like all cities, is a submarket by submarket story, and it is clear that Columbia Heights is very active right now. Delta reports that rents in the Columbia Heights/ Shaw area, now an average $3.64 per square foot, are the highest in the city.

Also absorption varied greatly last quarter, depending on the neighborhood. In Upper Northwest it rose 22% year over year; in the Capitol Hill/Riverfront SW market it rose 43% and in Northeast absorption was up 52%. As for the District as a whole, according to Delta, absorption was down nearly 25% from a year ago.

The Buyer

Zupancic and Fitzgerald received seven offers for 1111 Lamont St., almost all from local buyers, with the winning bid going to a local developer, who typically develops small and mid-sized condo conversions, Fitzgerald tells GlobeSt.com. However, this building will remain apartments, he says. “This will be pure cash flow to add to his portfolio.”

Several economic factors have resulted in net positives for the multifamily sector and prices in core markets are at an all-time high. But just how long can the market continue on this trajectory? Join us at RealShare Apartments East on Feb. 28 and March 1 for insights on succeeding in the right markets as well as navigating and finding opportunities in the more challenging ones. Learn more.

WASHINGTON, DC–1111 Lamont St. NW, a 13-unit apartment property in Columbia Heights, has traded for $3.25 million, or $250,000 per unit. If that sounds like Class A apartment pricing, you would be correct. However, 1111 Lamont St. is definitely a class B property despite its recent renovations, according to Grant Fitzgerald and Marty Zupancic of Marcus & Millichap, who marketed the property on behalf of the seller, a local private investor.

A Microtrend

The property traded in the 5% cap rate range — and there have been numerous Class B apartment trades in Columbia Heights at that cap rate, according to Fitzgerald.

Class B apartments in this submarket have essentially become the new Class A, Zupancic tells GlobeSt.com.

There are many class A buildings in the pipeline that are close to delivery, he explains, and the vacancy rate for class A is nudging up as a result. Landlords are also more willing to grant concessions for Class A buildings as fundamentals for this particular product grow softer, Zupancic adds.

Meanwhile, Class B properties that are transit friendly are doing very well. “There is a huge investor interest in Class B properties now in this part of the District,” he says.

A Market By Market Story

To be sure, the trend Zupancic and Fitzgerald are describing is not necessarily reflective of the larger Washington DC area apartment market — or even the District.

It is true that oncoming supply has been above 30,000 units since 2011 and rent growth has been below-average for at least the same amount of time, according to Delta Associates' fourth quarter overview of the apartment sector in Washington DC. Despite this, Delta Associates said vacancy is about the same as a year ago and rent growth in the District remains strong compared to the suburbs. It did note, though, that vacancy is on the rise.

That said, the December 2016 vacancy rate for stabilized Class A apartments in the Washington metro area is down 10 basis points from a year ago to 4.5%.

But the District, like all cities, is a submarket by submarket story, and it is clear that Columbia Heights is very active right now. Delta reports that rents in the Columbia Heights/ Shaw area, now an average $3.64 per square foot, are the highest in the city.

Also absorption varied greatly last quarter, depending on the neighborhood. In Upper Northwest it rose 22% year over year; in the Capitol Hill/Riverfront SW market it rose 43% and in Northeast absorption was up 52%. As for the District as a whole, according to Delta, absorption was down nearly 25% from a year ago.

The Buyer

Zupancic and Fitzgerald received seven offers for 1111 Lamont St., almost all from local buyers, with the winning bid going to a local developer, who typically develops small and mid-sized condo conversions, Fitzgerald tells GlobeSt.com. However, this building will remain apartments, he says. “This will be pure cash flow to add to his portfolio.”

Several economic factors have resulted in net positives for the multifamily sector and prices in core markets are at an all-time high. But just how long can the market continue on this trajectory? Join us at RealShare Apartments East on Feb. 28 and March 1 for insights on succeeding in the right markets as well as navigating and finding opportunities in the more challenging ones. Learn more.