AS RENTS DIP, ABSORPTION CONTINUES TO CLIMB
Washington, DC, July 10, 2018: Annual absorption in the Baltimore metro continued to grow – absorbing 3,195 units in the 12-month period ending June 2018. This is a 26% increase from one year ago. Forty-six percent of apartment absorption in the metro area was in Baltimore City, while the Southern Suburbs followed as a close second absorbing 42% of the metro area total. Meanwhile, the development pipeline is down 20% metro-wide from a year ago. Rents edged up by 0.1% over the year and vacancy was up by 20 basis points. Only three projects began construction in the second quarter.
SECONDQUARTER 2018 HIGHLIGHTS
• Stabilized vacancy for the Baltimore metro area is up 20 basis points from last year to 4.3%. Vacancy in the suburbs increased by 10 basis points to 4.4% while in Baltimore City, it increased 20 basis points to 3.9%.
• Average effective rents in the metro area are $1,704 ($1.77 per SF). Rents are up slightly over the year by 0.1% metro-wide. East and NE Baltimore County was the only suburban submarket that experienced a rent decrease over the past year. Rents increased by 2.2% in the Southern suburbs and by 0.6% in the Northern suburbs. Rents in Baltimore City fell for the third consecutive quarter, down 3.6%, with all submarkets experiencing a decline in rents.
• The supply pipeline metro-wide is down 20% compared to the pipeline in June 2017. About 7,200 units are under construction or planned for delivery in the next 36 months in the metro area after attrition. The suburban submarkets that had an increase in the development pipeline from a year ago were Howard County/Columbia, West & NW Baltimore County, and East and NE Baltimore County. In Baltimore City, Downtown and Fells Point/Inner Harbor experienced an increase.
• Per project lease-up pace for the 21 actively marketing projects in the Baltimore metro area currently averages 16 units per month, which compares to an average of 18 units per project per month a year ago. Projects that recently stabilized have an average lease-up pace of 13 units per month.
• Apartment building sales in 2017 include four transactions in low-rise buildings valued at a total of $264.4 million ($239,014 per unit) and four transactions in mid- high-rise buildings valued at a total of $261.7 million ($257,073 per unit). Through early June, four transactions in low-rise buildings valued at a total of $147 million ($206,171 per unit) closed.
Eight of the 10 submarkets we track have less than four years of apartment supply based on absorption over the past 12 months. In addition, two submarkets will add less than 10% of existing inventory over the next 36 months. Baltimore’s supply/demand relationship indicates that vacancy rates will decrease 100 basis points to 3.3% by second quarter 2021; however, we expect vacancy to fluctuate during this three-year period. Rents will likely grow only slightly over the next 24 to 36 months, below the long-term average.
Delta Associates, the research affiliate of Transwestern, is a firm of experienced professionals which has been providing consulting and subscription data services to the commercial real estate industry for over 35years.
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