Supply Surge Moderates Rent Growth in DC

The metro’s multifamily demand remains strong in the context of a high barrier to homeownership, while a steady influx of high-paying jobs continues to lure residents to the area.
Washington, D.C. rent evolution, click to enlarge
Washington, D.C. rent evolution, click to enlarge

The metro’s renowned universities and steady influx of high-wage jobs continue to lure residents to Washington, D.C., supporting household formation and—given the area’s high barriers to homeownership—pushing up multifamily demand. The market’s strong fundamentals have generated a supply surge, which began in 2014 and continued through 2017. Consequently, rents have remained relatively flat in recent months, while occupancy in stabilized properties declined to 94.8 percent as of February.

Employment growth was highest in education and health services, which added 17,100 jobs. This expansion will likely continue, with the opening of large new developments, including the Inova Center for Personalized Health, which is slated to rise at the former ExxonMobil headquarters campus in Merrifield, Va. Professional and business services gained 12,700 positions, followed by leisure and hospitality, which expanded by 7,700 jobs.

Facing rising capital costs, many buyers targeted suburban assets with lower entry expenses and higher first-year returns, while institutional investors remained focused on Class A properties in urban locations. Strong development activity is set to continue this year, with more than 11,200 units scheduled for delivery in 2018. Yardi Matrix expects demand to keep up, supporting rent growth of 1.3 percent in 2018.

Read the full Yardi Matrix report.