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Rapid leasing in District supports lower vacancy, rent 10,200 units Construction:
gains. Demand for apartments in the nation’s capital reaches will be completed Deliveries slow from the 13,600
its highest level in four years, reducing vacancy and accelerating units completed in 2017. Reston
rent growth. One of the submarkets where the positive net and Central D.C. each have over
absorption of units has been highest is Navy Yard/Capitol South. 1,000 rentals opening this year.
The inventory here grew 70 percent in five years while vacancy
fell 110 basis points. Over that same span in the northeast D.C.
area, strong demand dropped the number of available units by 60 basis point Vacancy:
an even greater margin of over 600 basis points. A slowdown in The leasing of more than 13,000
decrease in vacancy
openings aided this compression, allowing apartment managers units will drop vacancy to 4.4
to pull back on concessions. Each of these submarkets expects percent in 2018. Last year the rate
more than 2,000 units to be delivered in the next 12 months, rose 10 basis points.
which may soften their fundamentals in the short term until rentals
are leased.
3.0% increase Rents:
Completions head to high-demand areas. As the pace of The average effective rent rises
in effective rents
construction slows across the metro, development is picking in 2018 to $1,727 per month,
up in select submarkets. Both Rockville, Maryland, and Reston, the highest rate of appreciation
Virginia, are welcoming more arrivals in 2018 than they did last in three years.
year, while reporting vacancy declines and positive rent growth
over the past four quarters. Rental demand in these submarkets
will remain strong for the rest of this year, bolstered by both local
job creation and commuters making the short trek into D.C.
Investment Trends
Local Apartment Yield Trends • Investor activity picked up notably south of the District in Charles
Apartment Cap Rate 10-Year Treasury Rate
County, Maryland, during the 12 months preceding October. A
series of Class B and C buildings built between the 1980s and
12% 2000s changed hands at an average sale price of $139,000
per unit, well below the market average of $195,000. Some
9% investors may be looking to reposition from Maryland to northern
Virginia, where renter demographics are more favorable.
Rate
6%
• Sales velocity increased year over year in Georgetown and
3% Capitol Hill. All properties traded in that time were built before
1970 and ranged in size between five and 25 units. Both
0% submarkets offer consistent sources of rental demand, with
* 00 02 04 06 08 10 12 14 16 18*
nearby universities and government offices, contributing to
sales prices above $300,000 per unit in some cases.
Sales Trends • Unlike in most years, the number of trades priced below $10
Sales Price Growth million almost matches the number of deals in the $20 million
and above zone. Gaithersburg and Alexandria were the frequent
Price per Unit (000s)
$240
* Cap rate trailing 12-month average through 3Q; Treasury rate as12%
of Sept. 28
targets of institutional-grade investors over the past 12 months.
Year-over-Year Gr
$120 4%
Washington, D.C.
3Q18 – 12-MONTH PERIOD
Employment Trends EMPLOYMENT:
Local Apartment Yield Trends
4%
Metro United States
2.2%
Apartment Cap Rate 10-Year Treasury Rate
increase in total employment Y-O-Y
Year-over-Year Change
12%
• Roughly 53,900 positions were added during the first
3% nine months of the year, contributing to the 72,300 jobs
9%
created during the past 12 months.
2%
Rate
• 6%
Hiring in professional and business services made up the
1% largest share of employment growth across economic
3%
sectors, followed by gains in education, healthcare ser-
0%
vices and hospitality.
0%
14 15 16 17 18* 00 02 04 06 08 10 12 14 16 18*
Year-over-Year Growth
approximately 13,700 units were delivered
$180 8%in the previous
Units (000s)
15
yearlong period. Developers were most active in Central
$120 4%
10 D.C., Navy Yard, Tysons Corner, and Reston.
5
• $60
More than 26,200 units are planned or0%underway with
completion dates scheduled through early 2021. Navy
0 $0 and Northeast D.C. are frequent development
Yard -4% sites.
14 15 16 17 18* 14 15 16 17 18*
* Forecast
Multifamily Research | Market Report
DEMOGRAPHIC HIGHLIGHTS
3Q18 MEDIAN HOUSEHOLD INCOME 3Q18 AFFORDABILITY GAP MULTIFAMILY (5+ Units) PERMITS
*Mortgage payments based on quarterly median home price with a 30-year fixed-rate conventional mortgage, 90% LTV, taxes, insurance and PMI. **2017-2022 Annualized Rate
• A rising
9% interest rate environment may be impacting
Hyattsville/Riverdale2% 2.9% -30 $1,367 3.2% some deals, as the metro’s average cap rate
Rate
SALES TRENDS
$180 8%
Units (000s)
0 $0 -4%
14 15 16 17 18* 14 15 16 17 18*
Portland Office:
Adam A. Lewis Vice President/Regional Manager
111 S.W. Fifth Avenue, Suite 1550
3Q18 Apartment
Portland, OR 97204 Acquisitions By DAVID G. SHILLINGTON, President,
By Buyer
(503) 200-2000| Type
adam.lewis@marcusmillichap.com Marcus & Millichap Capital Corporation
Other, 1% Cross-Border, 9% • Fed pushes overnight lending rate higher, cites economic
Raleigh Office: Seattle Office: in case for additional increases. The Federal Reserve
strength
Benjamin Yelm Regional Manager
Equity Fund Joel increased the federal funds
Deis Vice President/Regional rate by 25 basis points in late September,
Manager
101 J Morris Commons Lane, Suite&130
Institutions, 23% lifting
Two Union the Fed
Square, 601 funds rate to
Union Street, 2 percent.
Suite 2710 Remarks from
the Fed highlight
Morrisville, NC 27560 Seattle,
a WA 98101 economy, spurred by accommodative
robust fiscal stimulus,
(919) 674-1100 | benjamin.yelm@marcusmillichap.com (206) 826-5700 | joel.deis@marcusmillichap.com
while inflation remains broadly in line with expectations. Provided
Private, 63%
Listed/REITs, 4% the economy continues to perform as expected, the Fed is likely to
Ontario Office: St. Louis Office:
increase rates in December, as well as up to three times next year.
Cody Cannon Regional Manager Richard Matricariainterest
• Benchmark rates,
Senior Vice President/Divisilending
on Manager costs push higher post-
CAPITAL MARKETS
3281 East Guasti Road, Suite 800 7800 Forsyth Blvd., Suite 710
Ontario, CA 91761
Fed meeting. After the Federal Reserve lifted overnight rates and
St. Louis, MO 63105
Apartment Mortgage Originations maintained a positive economic outlook, long-term interest rates have
(909) 456-3400 | cody.cannon@marcusmillichap.com (314) 889-2500 | richard.matricaria@marcusmillichap.com
By Lender
pushed higher. The 10-Year Treasury yield has quickly traded toward
100% the 3.25 percent range, which is prompting lenders to pass on the
Percent of Dollar Volume
The information contained in this report was obtained from sources deemed toReno Office:
be reliable. Every effort was made to obtain accurate and complete information; however, no
representation,San Jose
warranty or Office:
guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. Note: Metro-level employment
growth is calculated
Stevenbased J. on the last month
Seligman of the
First Vice quarter/year. Sales
President/Regional Manager Ryantransactions
data includes DeMar Vice valued at $1,000,000 and
President/Regional greater unless otherwise noted. This is not intend-
Manager
ed to be a forecast of future events and this is not a guaranty regarding a future 50 event. This is not
W. Liberty St., intended
Suite 400to provide specific investment advice and should not be considered
2626 Hanover Street
as investment advice.
Palo Alto, CA 94304 Reno, NV 89501
Sources: Marcus & 391-1700
(650) Millichap Research Services; Bureau of Labor Statistics; CoStar
| steven.seligman@marcusmillichap.com Group, Inc.;
(775) 348-5200 Experian; National Association of Realtors; Moody’s Analytics; Real Capital
| ryan.demar@marcusmillichap.com
Analytics; RealPage, Inc.; TWR/Dodge Pipeline; U.S. Census Bureau