Annual rent growth in the Washington metro area Class A apartment market is trending above the long-term average in the first quarter of 2024, as the development pipeline has moderated and demand remains strong. Meanwhile, vacancy is up in Northern Virginia. Net absorption outpaced deliveries in the District over the past year and in Suburban Maryland, absorption nearly matched new deliveries. We expect competitive market conditions to accelerate as deliveries are expected to rise significantly throughout the metro area in the rest of 2024 and early 2025. Although increasing construction and finance costs severely limited starts in the second half of 2023, a total of 2,150 units started construction in the first quarter of 2024, all in the suburbs.
FIRSTQUARTER 2024 HIGHLIGHTS
- Class A absorption is above the long-term average, with 11,268 Class A units absorbed in the 12-month period ending March 2024. Absorption including Class B product totaled 10,674 units.
- Metro area Class A rents increased by 4.5% over the 12-month period ending March 2024. For Class A and Class B combined, metro area rents increased by 4.7%.
- The stabilized vacancy rate for all classes of investment grade apartments increased by 30 basis points over the past 12 months and now stands at 3.5%; Class A vacancy also experienced a 30 basis-point increase to 4.6%.
- The 36-month developmentpipeline is downfrom a year ago to 38,818 units, due to decreases in all three substate areas, most significantly in the District.
- Only5,768 units started construction in the 12-month period ending March 2024. During the first quarter 2,150 units started construction, all in Northern Virginia and Suburban Maryland.
- Meanwhile, 10,907 units delivered in the 12-month period ending March 2024. Northern Virginia and the District each accounted for roughly 40% of deliveries while Suburban Maryland accounted for the rest.
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 40years.
