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Demand for Multi-Housing Buildings in Washington, D.C. Remains Stable in 2015 Despite Slow Job Growth

Monday, July 13, 2015

Despite the influx of new multi-housing buildings and anemic job growth during 2014, apartment market fundamentals in the Washington, D.C. region beat expectations.

Employment and Population TotalsHealthy net new migration of young adults and the renter-by-choice cohort bodes well for the apartment market fundamentals. The Washington, D.C. region’s employment grew by 0.6 percent in 2014 and is expected to increase by 100 basis points (bps) to 1.6 percent in 2015. Job growth in Washington is forecast to remain above the 1-percent mark, enabling stable effective rent growth and demand for multi-housing buildings in Washington, D.C.

Axiometrics said, “people were beating up on Washington because of its abundant new supply and low rent growth, but in reality, the new units are being absorbed. Jobs are being added at a greater clip, and the Washington/Bethesda area should be seeing higher rent growth figures as the year progresses.”

Washington, D.C. Multi-Housing Development

The 21,647 new units delivered in 2014 is almost triple the long-term average. New multi-housing building supply is forecast to stay elevated in 2015 – but at a lower level – and then gradually return to levels closer to the historical average of 8,000 units.

Multi-Housing Building Occupancy & Absorption

The metro area’s 2014 multi-housing buildings occupancy rate of 94.9 percent was only 30 bps below the 1997-2014 long-term average of 95.2 percent, pointing to high equilibrium occupancy of the area. Absorption is projected to moderate from 22,652 units in 2014 to 15,771 units in 2015 then gradually levels will return to to the historical average.

Washington D.C. OccupancyWashington D.C. Completions and Net Absorption 

Rental Rates for Multi-Housing Buildings

Washington’s effective rent growth escaped negative territory in 2014, ending the year at 0.5 percent, compared to the -1.1 percent at year-end 2013. Effective rent growth is forecast for 2.2 percent in 2015, and it is expected to pick up the pace starting 2016, fueled by positive job growth and slowing new supply compared to 2013-2015.

Washington D.C. Rental RatesWashington D.C. Annual Rent Growth 

Contact HFF Washington, D.C. for more information regarding multi-housing properties on the market in this area.

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