WASHINGTON, DC–Ungrouping. It sounds like a word Gwyneth Paltrow might use to describe the breakup of a living arrangement among roommates or family members and in fact, that is exactly what it means in this particular context. Ungrouping will continue to drive annual absorption rates of Class A apartments in the Washington DC area as rents will likely stay below average and new supply will continue to flood the market, at least until 2018.
That is according to Delta Associates, which reports that, after dipping below the five-figure mark in the fourth quarter of 2016, annual absorption of Class A apartments reached over 10,000 units in the first quarter of 2017. Specifically, the Washington DC area recorded 10,381 Class A units absorbed during the 12 months ending March 2017.
This is not to say fundamentals uniformly suggest endless growth for this asset class.
Rent growth remained below average in Q1, registering a 1.5% increase for all investment-grade apartments. (Class A rents increased by 1.7% and Class B by 1.1%). Meanwhile, oncoming supply has averaged above 30,000 units since 2011, and, according to separate stats from Axiometrics, projected apartment deliveries this year in the area will rise 33.7% to 13,141 and then drop in 2018 to 7,997.
The bottom line, according to Delta, is that absorption of Class A units over the next 36 months will likely be significantly higher than the region's 10-year annual average. As it says in its report:
This projection is predicated upon the 'denesting' and 'ungrouping' of potential renters currently living with parents or roommates, along with job growth and a stable or rising ratio of renters to owners.
WASHINGTON, DC–Ungrouping. It sounds like a word Gwyneth Paltrow might use to describe the breakup of a living arrangement among roommates or family members and in fact, that is exactly what it means in this particular context. Ungrouping will continue to drive annual absorption rates of Class A apartments in the Washington DC area as rents will likely stay below average and new supply will continue to flood the market, at least until 2018.
That is according to Delta Associates, which reports that, after dipping below the five-figure mark in the fourth quarter of 2016, annual absorption of Class A apartments reached over 10,000 units in the first quarter of 2017. Specifically, the Washington DC area recorded 10,381 Class A units absorbed during the 12 months ending March 2017.
This is not to say fundamentals uniformly suggest endless growth for this asset class.
Rent growth remained below average in Q1, registering a 1.5% increase for all investment-grade apartments. (Class A rents increased by 1.7% and Class B by 1.1%). Meanwhile, oncoming supply has averaged above 30,000 units since 2011, and, according to separate stats from Axiometrics, projected apartment deliveries this year in the area will rise 33.7% to 13,141 and then drop in 2018 to 7,997.
The bottom line, according to Delta, is that absorption of Class A units over the next 36 months will likely be significantly higher than the region's 10-year annual average. As it says in its report:
This projection is predicated upon the 'denesting' and 'ungrouping' of potential renters currently living with parents or roommates, along with job growth and a stable or rising ratio of renters to owners.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- 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
*May exclude premium content© 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.
