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DC Metro Multi Family Snapshot 2Q12
1. Multifamily Snapshot
DC Metro • Second Quarter • 2012
Market Tracker Vacancy Net Absorption Completions Asking Rent
*Arrows = Current Qtr Trend 3.9% 894 Units 327 Units $1,476
Vacancy Drops, Despite New Supply
A large portion of apartment demand is driven by an expanding economy and employment growth.
Despite a slowdown in federal job creation, the Washington regional employment market continues
to expand. After a robust first quarter in 2012, second-quarter employment growth continued in the
metro area, albeit at a slower pace. The Washington DC region added 12,200 non-farm payroll jobs
in the first quarter of this year, and 8,000 jobs in the second. We expect this moderate job growth
to continue through the November elections and into 2013. However, the types of jobs being
created have changed. Twelve to eighteen months ago the Federal Government and the Professional
and Businesses Services sector were the top job producers in the region. At the end of the second
DC METRO MULTIFAMILY
quarter 2012, the Education and Healthcare sector led employment growth gaining 8,000 payrolls
Economic Indicators since the beginning of 2012. The Federal Government downsized by 4,900 payrolls – the equivalent
of 1.3% of the regional federal workforce – during the same timeframe.
2Q 2012 2Q 2011 As the regional employment picture generally continues to improve, more people are forming
Employment 3.030 M 2.987 M households. More of those households are renting. The homeownership rate in the Washington
metro area decreased for a second consecutive quarter, registering 65.8% in the second quarter of
Population 5.765 M 5.704 M 2012 after reaching 68.2% in in the fourth quarter of 2011. Based on the total number of
households, this decline in homeownership equates to an additional 48,000 households who rent.
Median Income $89,170 $86,654
Such increased demand from these additional renters is helping to prop up multifamily fundamentals
MF Permits Issued 2,650 2,163 in the region. Net absorption for apartments in the second quarter of this year was 894 units metro-
wide – a slight up-tick from that reported in the previous quarter. The number of new apartment
MF Starts 1,887 1,199
completions in the second quarter was more than double that of the first quarter. Despite new
apartment deliveries, the vacancy rate decreased 0.1 percentage point over the quarter ending at
3.9% metro-wide. Average asking rental rates were $1,476 per month across the region, a 0.9
Absorption, Completions & Vacancy percentage point increase over the quarter. Once again, Northern Virginia boasted the highest rate
increase on average, a gain of $16 during the quarter to $1,569. Rents in the District increased $14
10,000 7% to $1,500, while those in suburban Maryland rose $10 during the quarter to $1,359.
9,000 6%
8,000
7,000 5% After a slow start early in the year, multifamily sales picked up steam in the second quarter. For the
# of Units
6,000
5,000
4% first half of 2012, $1.4 billion in multifamily sales transactions took place. A majority of these sales
3%
4,000 occurred in the suburbs with $576 million transacting in Northern Virginia and $569 million in
3,000 2%
2,000
1%
suburban Maryland since the beginning of the year. The average price per unit was $202,000. The
1,000
0 0% highest dollar transaction in 2012 to date has been Equity Residential’s purchase of 4701 Willard
2007 2008 2009 2010 2011 2012 Avenue in Chevy Chase for $209 million or $393,000 per unit.
YTD
Net Absorption Completions Vacancy Forecast
Source: REIS • Multifamily construction continued to increase in the second quarter of 2012. Multifamily
starts were up 57% compared to one year ago while permits were up 23% during the same
time frame. Through 2014, an estimated 30,100 multifamily permits will be pulled compared
Asking Rents to the 13,800 permits issued from 2009 to 2011. Expect single family construction to make
$1,600
a recovery as well with over 40,000 permits being issued through 2014. That is a 77%
$1,550 increase compared to the prior three years.
$1,500
$1,450 • Net migration to the Washington DC metro area will continue to increase, albeit at a slower
$1,400
rate. Moody’s estimates a net 66,300 people migrating to the region through 2014. This
$1,350
$1,300 compares to the 140,700 people who migrated to the metro from 2009 to 2011. Therefore,
$1,250 multifamily demand will stem more from current residents versus new populace to the region.
$1,200
2007 2008 2009 2010 2011 2012 YTD • We expect employment growth to be tempered through the federal elections later this year.
DC NoVA Suburban MD
This may push some demand for housing from this year into 2013. With large amounts of
Source: REIS supply forecast to deliver over the next 12 to 24 months, certain submarkets may see
vacancy rates rise in the short term. Still, the Washington Metro continues to boast one of
the lowest multifamily vacancy rates in the U.S.
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