You are here

Tracking the Washington, D.C. Apartment Boom

Throughout 2013, the Washington, D.C. metropolitan area had been very active in building new apartment communities and expanding on old ones, as many changed hands in multimillion dollar deals. It looks as though that trend will continue well into 2014 as developers plan to deliver an approximate 18,000 new units by year’s end after delivering 10,000 in 2013.

From Pentagon City’s 700-unit Metropolitan Park to the 310-unit Fenwick Station in Silver Springs, apartment buildings are popping up all over after investors took note of rising rent prices and lowering vacancy rates. Throughout 2013, apartment landlords continued to push rents higher in almost all metropolitan areas in the U.S.

Nationwide, rents were raised by an average of 0.8 percent to $1,083 in the final quarter of 2013, resulting in a 3.2 percent total hike for whole year. Vacancy rates, in the meantime, fell nationally to 4.1 percent and are well below the 8 percent peak noted at the end of 2009.

“Demand for apartments remains strong,” Ryan Severino, a senior economist with real estate research firm Reis, said to the Wall Street Journal. “Not even the seasonal weakness normally observed during the fourth quarters of calendar years had much if any impact on the market dynamics.”

Construction of apartment buildings has especially boomed in metropolitan areas such as Washington, D.C., where access to public transportation is paramount to workers. Developers are working to appeal to younger renters who are willing to spend a little more for building amenities such as outdoor theaters and large gourmet kitchens.

Condo Market Poised to Bite Back

Citing rising mortgage rates, tighter borrowing requirements and higher home prices, buying homes has been placed out of reach for many potential buyers. As a result, investors wanted to take advantage of a strong rental market and started the building craze.

A tight condo market also helped to boost apartment speculation. Most condo projects in the D.C. area have less than 50 units and are unable to meet growing demand for housing.

However, with such a tremendous influx of apartment units, market watchers warn that a correction could be in store. Washington, D.C. may be seeing a backlash already as the boom in construction has hit at a time when the job market is cooling in the area.

Marcus & Millichap Real Estate Investment Services anticipates that the elevated construction and federal spending cuts will cause the region’s vacancy rate to rise 5.9 percent while rent growth will slow to 2 percent after hitting 2.6 percent. With a predicted influx of 58,100 jobs, an increase of 1.9 percent, the firm estimates that the number of vacant apartments completed in 2014 will vastly outnumber those who will be financially able to rent them out.

With so much activity coming down the pipeline, it will be interesting to see how investors react to the demands of the public, whatever they may be.

If you are interested in buying a condo in the Washington, DC area, please don’t hesitate to contact us. We are a team of property experts and can help you wade through all current speculation and concerns.