Transwestern and Delta Associates today announce they hosted the 20th Annual Delta Associates Washington/Baltimore Multifamily Market Overview and Awards for Excellence, sponsored by Aronson and M&T Bank. On the morning of Oct. 19, more than 300 attendees gathered at the National Housing Center in Washington, D.C., for the presentation and an awards ceremony recognizing achievements in the multifamily industry over the past year.
David Weisel, CEO of Delta Associates, presented an economic overview of the Washington/Baltimore region. William Rich, Multifamily Practice director at Delta Associates, presented an overview and forecast of the apartment and condo market in the region. Delta Senior Associate Justin Donaldson presented the awards.
The market overview and awards presentation can both be downloaded at www.multifamilydc.com.
WASHINGTON ECONOMY
The Washington-area economy is currently in a solid expansion cycle. The federal government added 5,700 jobs in the 12-months ending August 2016 – the most in any 12-month period since 2011. However, continued growth in this sector will depend on the outcome of the presidential election.
“Renewed growth in federal jobs bodes well for the Washington, D.C., metro, but the private sector will continue to be the key driver of regional economic growth,” said Weisel.
BALTIMORE ECONOMY
The Baltimore-area economy expanded vigorously in 2016 and continues to eclipse nearly all of its traditional blue-collar peer metros in job growth. Notably, Delta projects job growth averaging 20,400 jobs per year during the next four years in the Baltimore metro, over 70 percent higher than the 20-year average.
“Innovative entrepreneurship has taken off in recent years in the Baltimore area, in both Baltimore City and its suburbs,” said Weisel. “The region’s relatively low cost of living relative to Washington and other nearby metros, its affordable office space, and its anchor educational and medical institutions have created a very appealing environment for startups.”
WASHINGTON AREA APARTMENT MARKET
Absorption: As of third-quarter 2016, annual net absorption for Class A and B apartments was 10,549 units, well above the long‐term average. Absorption of Class A units over the next 36 months will likely be significantly higher than the region’s 10‐year annual average.
Vacancy: In three years, Delta expects the region-wide vacancy rate for stabilized Class A apartment properties will be 3.5 percent, 40 basis points lower than it is today. However, there will be significant variance in conditions among submarkets. In Northern Virginia, vacancy is expected to be 100 basis points lower in three years, to 3.2 percent, the lowest of the Washington, D.C., area. It’s also the only sub-state area where absorption is expected to outpace incoming supply.
Rent Growth: Delta expects rent growth to recover to the 2 to 3 percent range by 2017 and to approach long-term average growth rates by 2018. Rent growth is likely to be stronger in Northern Virginia than the District, where a relatively large amount of new supply is projected to enter the market.
“Nearly 6,000 units are projected to deliver in the District over the next 12 months,” said Rich. “In three years, the amount of new product expected to come on the market will increase the existing Class A inventory in the District by more than half, which will impact rents.”
BALTIMORE APARTMENT MARKET
Absorption: The Baltimore metro registered strong absorption during the past 12 months, at 2,008 units compared to 1,594 units the prior year. Delta projects strong Class A apartment absorption over the next three years due to recent demographic and lifestyle shifts that will generate rental demand and lessen the impact of an increase in supply.
Vacancy: Vacancy rates are projected increase from 3.7 percent as of third-quarter 2016 to about 5 percent by third-quarter 2019.
Rent Growth: Rents are likely to grow by 2 to 3 percent per year during the next 24 to 36 months, below the long-term average.
WASHINGTON CONDO MARKET
A shortage of new condo units persists in the market, as the number of actively marketing units is now about 10 percent of what it was at the peak of the last cycle from 2005 to 2006.
“In the previous cycle, many apartment projects were converted to condos or switched midway through construction to become condos to meet demand,” said Rich. “However, the inventory of apartment product this time around is ill-suited for conversion because of location or project scale.”
While the Washington condo market continues to be very supply-constrained, the introduction of some larger condo projects over the past several months resulted in the best 12-month sales performance since 2013. Over the past 12 months, sales metro-wide are up 22 percent from the prior year.
Delta anticipates price increases in the mid-single digits during the next 24 to 36 months, with higher gains in certain submarkets. Delta estimates 1,800 new unit sales in 2017 as more product is brought to market.
ABOUT ARONSON LLC
Aronson LLC provides a comprehensive platform of assurance, tax, and consulting solutions to today’s most active industry sectors and successful individuals. For more than 50 years, we have purposefully expanded our service offerings and deepened our industry specialties to better serve the needs of our clients, people, and community. From startup to exit, we help our clients maximize opportunity, minimize risk, and unlock their full potential. For more information about Aronson LLC, visit www.aronsonllc.com and follow us at @AronsonLLC for news and updates.
ABOUT M&T BANK
M&T Bank is a multi-state community-focused bank serving New York, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia and Washington, D.C. Founded in 1856, M&T Bank provides banking, investment, insurance and mortgage financial services to consumer, business and government clients.
ABOUT DELTA ASSOCIATES
Delta Associates is a firm of experienced professionals offering consulting and research services and subscription reports to the commercial real estate industry for over 35 years. We conduct over 100 client assignments each year, including market studies, market entry strategies, asset performance enhancement studies, pre-acquisition due diligence, impact analyses, and litigation support. Our practice is experienced in most property types including apartments, condominiums, office, retail, hotel, and mixed-use, and we work on properties throughout the U.S. See examples of our experience and sample publications at www.DeltaAssociates.com. Check our blog at The Delta Download. Follow us on LinkedIn, Twitter, and Facebook.
ABOUT TRANSWESTERN
Transwestern is a privately held real estate firm of collaborative entrepreneurs who deliver a higher level of personalized service – the Transwestern Experience. Specializing in Agency Leasing, Management, Tenant Advisory, Capital Markets, Research and Sustainability services, our fully integrated global enterprise adds value for investors, owners and occupiers of all commercial property types. We leverage market insights and operational expertise from members of the Transwestern family of companies specializing in development, real estate investment management and research. Transwestern has 34 U.S. offices and assists clients through more than 180 offices in 37 countries as part of a strategic alliance with BNP Paribas Real Estate. Experience Extraordinary at transwestern.com and @Transwestern. For updates from the Mid-Atlantic region, follow @TranswesternDC.
