Stable Vacancies and Rising Rents in Washington, D.C. Result in More Multifamily Transactions

The Washington, D.C., area is posting steady multifamily property performance through the first half of 2024. While many markets across the country are being impacted by rapid increases of new apartment supply, inventory growth in the Washington, D.C., area has closely tracked in line with increases in renter demand. The result has been a vacancy rate that has recorded minimal fluctuations over the past several quarters, and rents that have trended higher. The Northern Virginia segment of the region has generally outperformed, with tighter vacancies and annual rent growth that has topped 5 percent as of the second quarter. Developers are responding to the strong conditions by bringing new projects through the development pipeline in Northern Virginia. New deliveries have been concentrated in and around the National Landing submarket in Arlington.

Investors stepped up activity levels in the region during the second quarter, following a period of limited transactions at the beginning of the year. Some of the recent increase in sales velocity is attributable to a surge in transactions closing within the boundaries of the District, where transaction totals year to date have nearly matched the total number of deals that closed in all of 2023. These transactions have included a mix of affordable and market-rate properties, highlighted by a handful of assets built within the past decade that traded near the top of the price-per-unit range. In Northern Virginia, nearly all of the properties that have sold to date have been located in sought after submarkets in Arlington and Alexandria.

Looking ahead

Washington, D.C., will likely be one of the top performing multifamily markets in the country through the remainder of 2024. Vacancy in the region has been steady for the past several quarters, averaging less than 5 percent. Conditions have been particularly strong in Northern Virginia, even as projects totaling more than 9,000 units have been delivered in Arlington, Fairfax, and Alexandria Counties since 2021. These parts of the region are expected to continue to receive new additions to inventory throughout the remainder of this year and into 2025. The pace of economic growth in the region is forecasted to maintain its recent trajectory. In Maryland, new construction will be concentrated in luxury developments in Montgomery County and mid-rise properties near transportation infrastructure in Prince George’s County.

Strong operational performance appears to be bringing investors back to the region after a decline in transaction activity in recent periods. The Washington, D.C., area features the stable market fundamentals and rising rents that investors are seeking, as well as a mix of new inventory in many of the higher-income submarkets of the region. Investment trends may be impacted by uncertainty surrounding the election, and the Washington, D.C., region is particularly sensitive to the political climate. During the past 20 years, transaction counts in presidential election years have generally been lower than in the year preceding them, followed by an average activity increase of 20 percent in the years following the election.

Download the full report below.

Learn more

Contact the Washington, D.C. office for more information.