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SHARP DECLINE IN NORTHERN VIRGINIA ABSORPTION

Washington, DC, July 10, 2018:Of the three substate areas, The District outperformed the others in absorption, change in vacancy, and rent growth. Annual absorption of Class A product in the metro area remained fell below 10,000 units, but remains well-above the long-term average. Metro area vacancy increased 30 basis points from a year ago, with the District being the only substate area to experience a decrease. The impact that the large influx of new supply has had on Northern Virginia has led to several months of elevated vacancy and slowed rent growth. Meanwhile, The District continues to experience strong absorption as rents increase and vacancy decreases.

SECONDQUARTER 2018 HIGHLIGHTS

• Thestabilized vacancyrate for all classes of investment grade apartments increased by 90 basis points over the past year and now stands at 3.6%.

• Class A vacancy experienced a 30-basis point increased to 4.1%.

• Rents for all investment-grade apartments increased 1.3% over the year. Class A rents increased 1.1%and Class B rents grew 1.4%.

• Annual Net Absorption, at 6,634 Class A and B apartments, is above the long-term average. Washington recorded 8,962 Class A units absorbed over the year.

Absorption of Class A units over the next 36 months will likely be significantly higher than the region’s 10-year annual average. This projection is predicated upon the “de-nesting” and “un-grouping” of potential renters currently living with parents or roommates, along with job growth and a stable or rising ratio of renters to owners.

• Average per project monthly absorption of new projects is at 15 units per month, as the number of projects in lease-up decreased by two during the past 12 months.

• The development pipelineof likely deliveries over the next 36 months increased slightly from first quarter 2018 and currently stands at 37,340 units. Starts in the 12-month period ending June 2018 were 10,550 units while 3,298 units started construction during the second quarter. Deliveries in the 12-month period ending June 2019 are projected to reach 13,100 units, a 48% increase over the past year.

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 35years.

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