Though there has been an influx of new units in the Washington area, apartment rents are holding steady as people increasingly turn toward renting amid the troubled mortgage environment.
In 2007, a record number of people nationwide occupied professionally managed apartments, the highest since 2000, according to a new report released by the Washington-based National Multi Housing Council. Across the country, the net absorption rate, or net number of leases signed, almost matched the total number for the previous four years.
In the Washington area, the picture is similar.
“Washington remains a solid apartment market,” said Grant Montgomery, vice president and director of apartment practice at Alexandria-based Delta Associates, which tracks real estate trends. “However, we are starting to see some stresses on that market.”
More projects have been launched in the last few quarters, said Montgomery, driving up supply. By the fourth quarter of 2006, 20 new projects entered the market, and a year later, 41 new developments sprouted up.
Despite having more than double the number of new units coming online in the metro area in 2007 compared with 2006, the net absorption rate kept up, almost doubling from 2,805 units in 2006 to just over 5,000 in 2007.
And that figure doesn’t account for the growing number of “nontraditional rentals” that comprise the “shadow market” of units that individuals are renting out instead of selling while they hold out for the housing market to improve.
Additionally, numerous apartments that were going to be converted to condos have ended up staying apartments, noted NMHC Chief Economist Mark Obrinsky. New buildings that were intended to be condos have also been marketed from the beginning as apartments, said Montgomery, a reversal from just a few years ago when condos were in demand. Senate Square in the H Street corridor, Halstead Tower in Alexandria, Highland Park in Columbia Heights and Io Piazza in Shirlington have followed this trend and become apartment buildings.
Even so, rents for class A and class B apartments, including professionally managed, high-end apartments and older complexes, increased 1.8 percent in the Washington area in 2007. Fromyear-end 2005 to year-end 2006, rents went up 4.7 percent. “In light of this [supply increase], it’s impressive that rents are still growing,” Montgomery said.
