D.C. Apartment Rents Rose 4% In 2018 After Falling In 2017
Rents for D.C. apartments rebounded in a big way in 2018, as buildings continue to lease up quickly and developers ramp up the pace of new construction.
Class-A apartment rents in the District rose by 3.9% in 2018, according to Delta Associates, after decreasing by 3.9% in 2017. The spike in rent prices coincided with a 7% increase in apartment absorption, with renters continuing to fill apartments as fast as developers can build them.
"Absorption has been quite strong in the District," Delta Associates President Will Rich said. "Submarkets throughout the city have responded surprisingly well to the increased competition in the marketplace."
Every submarket in D.C. experienced rising rents, but the area with the sharpest rent growth was Northeast D.C. with an 8.1% increase. That submarket consists of all neighborhoods in the quadrant outside of NoMa, Union Market and H Street, which Delta gives their own category and which posted the second-highest rent growth of 6.7%. The Capitol Hill/Capitol Riverfront/Southwest submarket, the area with the most new development, experienced 4% rent growth in 2018.
The D.C. region as a whole has experienced a similar trend. Metro-wide Class-A apartment rents increased 2.6% in 2018, the highest annual rent growth the region has achieved since 2010.
The region's strong rent growth is expected to continue for the foreseeable future. Delta Associates projects 2% metro-wide rent growth in 2019, and growth betwen 2.5% and 2.75% in 2020 and 2021.
The growing rents come even as D.C.-area developers continue to build new apartments at a faster pace. Delta Associates projects 14,747 units will deliver in 2019, a 50% increase from the 2018 delivery total of 9,867.
The sharp increase in region-wide deliveries comes in part because several buildings expected to deliver in late 2018 experienced delays and will be completed early this year, Rich said. But the pace of new construction starts also continues to be strong, ensuring a full pipeline of new units for the next several years.
Developers started construction on 11,824 units across the D.C. region in 2018, including 2,932 in the fourth quarter. The pipeline of expected deliveries over the next 36 months totals 38,188 units, led by 16,426 units in the District. The 36-month pipeline in the District is 14.6% larger than it was at the end of 2017, showing that developers are ramping up their new apartment construction.
"One benefit of the increase in the amount of units built around the city is it provides more options in different neighborhoods for residents to live in brand-new apartments," Rich said. "In previous years, new apartment development was concentrated in only a few areas around the city. Now you are seeing more options in different neighborhoods in a more diverse cross-section of the city."