In recent years, DC has experienced an influx of Millennials who have boosted absorption in the rental market, but Delta Associates' latest multifamily report says that trend is slowly fading.

While absorption remains well above the 10-year average, 2016 saw a steady decline that, by Q4, had reached the lowest level since Q2 2014.

"We expected the trend to start to go down but it went down a little more than we expected it would," Delta Associates' multifamily director Will Rich told Bisnow.

The slowdown in absorption has more to do with demographics than economics, Rich said. While DC's population continues to grow, the rate of growth has begun to slow. The main driver of growth now comes from international arrivals, Rich said, rather than American young professionals who are more likely to rent apartments.

"Job growth continues to be strong," Rich, above, said. "There will be absorption derived from strong job growth, but the strong job growth coupled with the demographic shift was what really created that level of record absorption in 2015, and demographics are not going to play as major a role in the next couple of years."

Delta expects absorption will continue to drop over the next three years. It predicts a 9,033-unit per year average through 2019, with 2017 being the strongest year in that period.

While this absorption would still be above the 10-year average, the area is preparing for a record year of multifamily deliveries. More than 13,000 units are expected to deliver across the DC Metro area in 2017, nearly 2,000 more than last year.

For the first time, deliveries in the District this year are expected to outpace NoVa. Rich says NoVa's multifamily market was quicker to bounce back after the recession, leading supply to surge there before it did in DC, which is experiencing peak deliveries. This will lead DC to experience more of the effects on vacancy and rent growth, which is expected to remain below the long-term average.

While this oversupply could spook developers from launching new construction, Delta has identified several submarkets that are supply constrained and could be ripe for development. The report defines supply constrained as markets with fewer than two years of supply available, based on last year's absorption numbers.

The supply constrained high-rise markets Delta Associates identified are Alexandria, Crystal City, Pentagon City, Northeast DC (Fort Totten/Brookland), upper Georgia Avenue and south Arlington. For low-rise submarkets, the reports points to Burtonsville, Charles County, eastern Prince William County and eastern Loudoun County.