JBG Smith Reports Accelerating Losses In Apartment Portfolio
Federal cuts have taken a growing toll on demand in JBG Smith’s large D.C.-area apartment portfolio. But the company expects that the worst of the impact is in the rearview mirror.
The occupancy rate in JBG's same-store apartment portfolio fell to 90.4% by year-end, down 1.8% from the third quarter, the Bethesda-based REIT said in its year-end earnings report Tuesday.
Its net operating income for those properties decreased by 5.1% from the quarter prior.
That NOI decline is more than double that of the quarter prior when it slid by 2.2%. Its average effective rents for new leases last quarter was down 8.1%, while rents for lease renewals increased 3.4%.
“The softness we have observed in our multifamily operating portfolio is mirrored by the broader DC metro area – largely the result of a tumultuous job market,” JBG CEO Matt Kelly wrote in his letter to shareholders accompanying the company’s report.
JBG owns around 6,500 apartment units in the District and the National Landing neighborhood of Northern Virginia. Four apartment towers it recently completed in National Landing — The Grace, Reva, The Zoe and Valen — aren't part of the same-store metrics.
Kelly said the worsening trajectory in Q4 was a result of the federal government’s massive workforce reductions that the Trump administration undertook over the past year. He highlighted a statistic that showed the metro area shed 48,500 jobs between November 2024 and 2025, “driven” by the federal government’s 52,400-employee decrease.
But he said those losses peaked in October following an exodus from the administration’s deferred resignation buy-out program, and they decreased “significantly” in November. He expects that stabilizing federal actions, combined with some other boosts from the federal budget, are set to bolster demand.
“Looking forward, however, the stemming of federal job losses, the restoration of federal funding to many impacted agencies, and new protections for federal employment – coupled with significant current and planned defense and intelligence spending – should stabilize demand in 2026 into 2027,” Kelly said.
Additionally, Kelly said the market for apartment landlords should be bolstered by the shortage of new buildings under construction. He cited CoStar data showing only three new multifamily projects started construction in the region last quarter totaling 1,083 units.
“We believe supply will remain constrained in the medium-term, giving stabilized demand an opportunity to drive occupancy and rent growth, although recovery will not be immediate,” Kelly said.
The REIT reported a net loss of $45.5M last quarter, an improvement from the $59.9M loss during Q3. Its full-year net loss of $139.1M was down from $143.5M in 2024.
For nearly a year, JBG Smith has been undertaking a strategy to take advantage of distress in the office market. It is using cash it generates from selling multifamily properties and development sites to acquire office assets at substantial discounts.
In May, the company acquired the 491.5K SF Dulles Plaza in Tysons for $42.3M. Then in December, JBG purchased Dulles View, a 360K SF office complex in Herndon, for $31.5M. Its earnings release said that acquisition was through a joint venture with a defense technology tenant.
That month, it also sold an office building at 2100 Crystal Drive — which it recently entitled for a 345-room hotel conversion — for $8M, it said in the earnings report. Property records show the buyer was Dauntless Capital Partners, which also purchased a Marriott in Crystal City from JBG in January 2024. The firm has plans to turn a D.C. office near the city's courthouse into a hotel.
The earnings release also disclosed the price it got for a previously announced sale of a Potomac Yard parcel to townhome developer Toll Brothers: $50.7M.
