Residential development in the District ground to a relative halt during the recession, creating a supply-and-demand scenario that boosted rents in the city and resulted in one of the highest apartment occupancy rates in the country last year. Meanwhile, office development remained healthy during the housing crisis but a slowdown could be in its future, according to an analysis by Delta Associates for the Washington D.C. Economic Partnership.
The city’s apartment vacancy rate was 3.6 percent last year, with the Columbia Heights/Shaw neighborhood having the highest occupancy rate in the District. Meanwhile, rents rose by nearly 3 percent in 2010, according to Delta, which also predicts that vacancy rates will tighten up this year.
| Coming out of the development plunge | ||||
| Residential sq. ft. completed* | Percent sq. ft. completed* | Office sq. ft. completed* | Percent change | |
| 2008 | 4.53 | -22% | 3.26 | -24% |
| 2009 | 3.59 | -21% | 6.03 | +85% |
| 2010 | 0.94 | -74% | 2.99 | -50% |
| In construction | 3.89 | +315% | 5.08 | +70% |
| * in millions | ||||
| Source: Delta Associates | ||||
Condominium sales increased by 44 percent last year in the District, compared with a 14 percent increase regionally.
That’s largely because “the District condominium market was early to respond to peaking demand in 2004-05 and early to slow down in 2007-08,” the report said. “So also is its recovery.”
Residential development had been inching down since 2007, but in 2010, it plunged, dropping by 74 percent for a total of less than 1 million square feet. During that time the neighborhood around Nationals Park was one of the few areas to see residential activity with several hundred new units opening in 2009 and 2010.
“These are nice apartments and condo prices below what you’re going to get downtown,” said Michael Stevens, executive director of the Capitol Riverfront Business Improvement District. “People are buying into the neighborhood. They’re waiting a while for some of the amenities, but they understand it’s worth the wait.”
But like other hot spots in the city, the riverfront has several residential projects expected to start leasing later this year and “supply pressures” will start to ease by the end of next year, Delta predicts.
“By 2013, concessions will be required to maintain lower vacancies, as a significant number of deliveries reverse the … balance in favor of renters,” the report said.
However, demand for office space fell toward the end of 2010, the report said, and rents slipped. With more than 5 million square feet in development, Delta expects the office vacancy rate to climb this year but even out by 2014.
