THE DISTRICT CONTINUES TO SHINE, BUT WATCH OUT FOR SUBURBAN MARYLAND

Rents are up, vacancy is down, and the District’s good fortune seems to be rubbing off on Suburban Maryland. At nearly 3,800 units absorbed, The District anchored a metro area that experienced Class A absorption well-above the long-term average. While Class A absorption has remained below 10,000 units in the metro area over the last three quarters, it has seen marginal improvements during that time. Metro area vacancy remained unchanged from a year ago, while Northern Virginia experienced the only increase. Rents rose across the metro area, with the District leading the way at 3.9% annual growth.

FOURTH QUARTER 2018 HIGHLIGHTS

• The stabilized vacancy rate for all classes of investment grade apartments increased by 10 basis points over the past year and now stands at 4.2%.Class A vacancy remained unchanged.
• Rents for all investment-grade apartments increased 3.0% over the year. Class A rents increased 2.6%and Class B rents grew 3.3%.
• Annual Net Absorption, at 8,812 Class A and B apartments, is above the long-term average. Washington recorded 9,091 Class A units absorbed over the year.Absorption of Class A units over the next 36 months will likely be significantly higher than the region’s 10-year annual average. This projection is predicated upon the “de-nesting” and “un-grouping” of potential renters currently living with parents or roommates, along with job growth and a stable or rising ratio of renters to owners.
• Average per project monthly absorption of new projects is at 14 units per month, as the number of projects in lease-up increased by one during the past 12 months.
• The development pipeline of likely deliveries over the next 36 months increased slightly from third quarter 2018 and currently stands at 38,188 units. Starts in 2018 were 11,824units while 2,932 units started construction during the fourth quarter. Deliveries in 2019 are projected to reach 14,747 units, a 50% increase over the past year. 

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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