Earlier this year, Class A apartment data indicated that rents in DC would decrease in the near future, largely due to the additional 10,000-plus rental units expected to enter the pipeline over the next two years. Now, the latest quarterly report from Delta Associates is doubling down on that prediction.
The second quarter report notes that apartment absorption rose by 2 percent year-over-year in the District proper. Most of this increase was carried by the Capitol Hill/SW Riverfront submarket, where residential development is concentrated and absorption rose by 160 percent. As for rents, the only DC submarkets that saw rental increases were Northeast and Columbia Heights/Shaw.
With the apartment deliveries on tap in the coming years, concessions are also likely to rise, but vacancy rates are actually expected to shrink by 3.8 percent — everywhere except DC.
Projected demand and supply of Class A apartments
“We project that vacancy will rise in DC proper and rents will decrease over the next couple of years due to the elevated amount of oncoming supply,” explains William Rich, president of Delta Associates. “Metro-wide, we are expecting vacancy will be lower in three years than it is today because of the lack of supply in Northern Virginia, the largest of the three sub-state areas.
“What happens in NoVa has an outsized effect on the region as a whole due to its size,” Rich continues. “The only sub-state area where vacancy is likely to be higher in three years is the District.”
Here is a quick snapshot of average rents for high-rise Class A apartments in DC area sub-markets, as defined by Delta:
-Alexandria: $2,109 per month
-Central (Penn Quarter, Logan Circle, Dupont Circle, etc.): $2,855 per month
-Upper Northwest: $2,870 per month
-Columbia Heights/Shaw: $2,673 per month
-NoMa/H Street: $2,401 per month
-Capitol Hill/Capitol Riverfront: $2,346 per month
-Rosslyn-Ballston Corridor: $2,425 per month
-Silver Spring/Wheaton: $1,939 per month
-Bethesda: $2,607 per month
Northeast: $2,040 per month
Note: The rents are an average of studios, one and two-bedroom rental rates at new buildings in the DC area.
Definitions:
Class A apartments are typically large buildings built after 1991, with full amenity packages. Class B buildings are generally older buildings that have been renovated and/or have more limited amenity packages.