After years of strong rent growth for Class B product in the Washington metro area, an annual decline was recorded across all sub-states this quarter. This market correction was caused by the COVID-19 shutdown as vacancy rose and concessions increased to offset decreased demand. The sharpest losses were recorded in the District at -2.7%, while Northern Virginia (-1.6%) and Suburban Maryland (-1.0%) were slightly less affected. Vacancy in Northern Virginia and the District rose by 160 and 200 basis points, respectively while in Suburban Maryland it fell 60 basis points from a year prior. Metro-wide class B rents are down -1.5% from June 2019.
- Suburban Maryland down-1.0%
- Northern Virginia down-1.6%
- District down-2.7%
- Metro-wide low-rise down-1.3%
- Metro-wide high-rise up -1.7%
Class B year-over-year rent growth (-1.5%) fared better than Class A (-3.2%), while vacancy in Class B buildings (3.6%) is 160 basis points lower than Class A (5.2%) in the second quarter of 2020. With rents in decline, vacancy rates may stabilize in the latter half of this year.
SECOND QUARTER 2020 HIGHLIGHTS
The Washington metro area Class B apartment vacancy rate is 3.6% as of June 2020, 80 basis points higher than June of last year.
Annual Net Absorption of7,529 for Class A and B units.
Renovation projects in the Washington metro area stalled during the second quarter of 2020 in the wake of COVID-19. At least 8,000 units are still under renovation, while 14 projects (5,900 units) completed renovations this past year.
- Low-rise vacancy is 2.6%, down10 basis points froma year ago.
- Mid- and high-rise vacancy is at5.3%, 230 basis points higher thanJune 2019.
Rents for all investment-grade apartments were down
-2.2% over the year.
- Class B rents alone were down-1.5% over the 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.
