After years of strong rent growth for Class B product in the Washington metro area, annual declines were recorded across all sub-states the past two quarters. The COVID-19 pandemic continues to devastate the multifamily market as vacancy rises and rents are cut to offset decreased demand. High-rise rents have been the most negatively impacted as tenants have chosen to relocate from this type of housing due to health concerns to lower-density multifamily or single-family/townhomes. The sharpest rent decrease in the metro area were recorded in the District, while Northern Virginia also posted significant reductions; Suburban Maryland has been less affected. In Prince George’s County, low-rise rents are up in most submarkets. Vacancy in Northern Virginia and the District rose by 230 and 330 basis points, respectively, while in Suburban Maryland it increased just 50 basis points from a year prior. Metro-wide class B rents are down -4.5% from September 2019.

Suburban Maryland down -1.6%

Northern Virginia down -5.7%

District down -8.9%

Metro-wide low-rise down -2.3%

Metro-wide high-rise down -7.4%

Class B year-over-year rent growth (-4.5%) fared better than Class A (-7.0%), while vacancy in Class B buildings (3.8%) is 160 basis points lower than Class A (5.4%) in the third quarter of 2020. With rents in decline, vacancy may stabilize towards the end of this year.

THIRD QUARTER 2020 HIGHLIGHTS

The Washington metro area Class B apartment vacancy rate is 3.8% as of September 2020, 170 basis points higher than September of last year.

oLow-rise vacancy is 2.3%, up just10 basis points froma year ago.

oMid- and high-rise vacancy is at6.3%, 420 basis points higher thanSeptember 2019.

Rents for all investment-grade apartments were down

-5.5% over the year.

oClass B rents alone were down-4.5% over the year.

Annual Net Absorption of3,505 for Class A and B units.

The emergence of new renovation projects throughout the metro area continued to stall during the third quarter of 2020.Upgrades are still underway in at least 19 projects (7,700 units) as of September 2020. Since third quarter 2019, at least 13 projects (5,650 units) have completed renovations.

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