Professional Documents
Culture Documents
M A R K E T
Washington, D.C., Metro Area
R E P O R T
Second Quarter 2012
Employment: In 2012, total employment in the metro area will expand 1.5 percent, or by 44,000 workers. Last year, growth in private-sector payrolls oset a slight loss of government jobs, yielding a net gain of 28,100 positions.
Construction: Developers will add 4,700 market-rate rentals this year, an increase from 2,300 units in 2011. Projects totaling 1,472 units will be delivered in the district, while nearly 2,400 rentals will come online in Virginia.
Vacancy: One year after vacancy plummeted 90 basis points, the rate will decline an additional 30 basis points this year to 3.9 percent, the lowest year-end level in the past 10 years.
Rents: Marketwide asking rents will rise 4.0 percent in 2012 to $1,467 per month and eective rents will gain 4.7 percent to $1,401 per month as strong tenant demand persists. In 2011, asking rents rose 2.4 percent and eective rents advanced 2.8 percent.
Economy
Employment Trends
Metro United States
Improving business conditions supported the hiring of 14,800 workers in the rst quarter this year. With the increase, 25,100 positions have been added across the metro in the past six months. Nearly 26,000 private-sector positions were added during the past six months, including 20,200 jobs from January to March. In the past half year, education and health services establishments created 8,100 jobs, while the opening of new hotels contributed to the hiring of 10,700 leisure and hospitality employees. A relatively strong job market helped lower the unemployment rate 10 basis points in the rst quarter to 5.6 percent. The local work force and the number of employed residents each increased during the period. Outlook: Employment in the metro will expand 1.5 percent, or by 44,000 new hires, in 2012; local employers created 28,100 positions last year.
4%
Year-Over-Year Change
2% 0% -2% -4%
08
09
10
11
12*
The number of existing single-family homes sold in the metro increased 15 percent over the year ending in the rst quarter. The median price rose slightly to $315,700 during the period. Developers will complete 16,000 units of single-family and multifamily housing during 2012, a 20 percent increase from one year ago. Completions rose 9 percent last year, the rst annual increase in six years. Developers are building to meet demand expected to be generated by the creation of an estimated 27,000 households during this year. Including the projected increase in 2012, household growth has exceeded housing completions in each of the past ve years. Outlook: The excess of projected household growth to the expected increases in housing supply will sustain favorable operating conditions for multifamily property owners in the near term.
08
09
10
11
12*
Construction
Construction Trends
Completions Multifamily Permits
A relatively mild winter enabled developers to complete all four projects and 519 market-rate rentals scheduled for delivery during the period. Over the past 12 months, 2,800 units were brought online, down from about 5,100 apartments in the preceding year. A new construction cycle is ramping up. Nearly 8,000 units with scheduled completion dates are under way in the metro, including 4,200 rentals slated for delivery over the nal three quarters of 2012 and the balance due for completion next year. By market section, about 2,600 units are being built in the district; 2,500 units are under way in Maryland; and Virginia has 2,900 rentals on the way. Approximately 53,000 rentals were planned during the rst quarter, an amount equal to 13 percent of existing market-rate stock. Roughly the same number of rentals were listed as planned at the end of last year, but many of those projects are now under construction. Outlook: Barring any delays, developers are on course to add 4,700 market-rate rentals this year, representing a 1.2 expansion of stock and an increase from 2,300 units in 2011.
Marcus & Millichap
18
Number of Units (thousands)
14 10 6
08
09
10
11
12*
* Forecast
page 2
Vacancy
The metrowide vacancy rate decreased 20 basis points in the rst quarter to 4.0 percent. More than 1,300 rentals were absorbed during the period, a sucient number to oset additions to inventory. Over the past year, the vacancy rate has declined 90 basis points.
Vacancy Rate
10% 8% 6% 4% 2%
Despite an addition to stock in the district, a larger increase in occupied units lowered the vacancy rate 30 basis points to 4.4 percent in the rst quarter. The vacancy rate was 5.3 percent one year ago. The vacancy rate in Maryland fell 20 basis points in the January-to-March period to 4.1 percent. In Virginia, demand growth moderated in the rst three months of 2012, leaving the vacancy rate unchanged at a still-low 3.8 percent. Outlook: Vacancy in the metro will decline 30 basis points this year to 3.9 percent, following a 90-basis-point plunge in 2011.
08
09
10
11
12*
Rents
Asking rents across the metro advanced for the ninth straight quarter during the January-to-March period, recording a 0.6 percent increase to $1,419 per month. Over the past year, asking rents have gained 2.6 percent. Also during the rst quarter, eective rents gained 0.7 percent to $1,347 per month. Eective rents have climbed for nine consecutive quarters and have increased 3.0 percent year over year. Average asking rents in the district rose 0.6 percent in the rst quarter, accompanied by a 0.7 percent bump in eective rents. Year over year, asking and eective rents there have risen 2.8 percent and 3.2 percent, respectively. In Virginia, asking rents rose 0.5 percent and eective rents climbed 0.6 percent during the quarter, while asking rents rose 0.6 percent and eective rents added 0.8 percent during the period in Maryland. Outlook: Marketwide asking rents will rise 4.0 percent in 2012 to $1,467 per month. Eective rents will gain 4.7 percent to $1,401 per month.
6%
Year-Over-Year Change
Rent Trends
Asking Rent Effective Rent
3% 0% -3% -6%
08
09
10
11
12*
Sales Trends**
Transaction velocity surged 40 percent over the past year. The number of deals in the district jumped 50 percent during the period, while smaller gains were posted in Maryland and Virginia. Deals executed over the past year carried a median price of $107,600 per unit, compared with a median price of $117,300 per unit in the preceding 12 months. The mix of properties changed from one period to another. In Maryland, for example, sales of several older assets in secondary locations over the past year carried a median price of $69,900 per unit. During the preceding year, sales of higher-quality properties underpinned a median price of $117,300 per unit. Overall, average cap rates in the metro sat in the low-6 percent range over the past year, reecting the inuence of sales of large institutional assets and properties in high density, high demand locations such as the district. Outlook: A strong rental housing market will sustain the metros stature as one of the countrys more liquid and active investment markets.
Median Price Per Unit (thousands)
Sales Trends
$130
$105
$80
$55
$30
07
08
09
10
11
* Forecast ** Trailing 12-Month Period Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics page 3
Capital Markets
By WILLIAM E. HUGHES, Senior Vice President, Marcus & Millichap Capital Corporation
John Sebree Director, National Multi Housing Group Tel: (317) 218-5300 john.sebree@marcusmillichap.com
The national apartment markets strong performance continued in the rst three months of 2012 as the vacancy rate slipped 30 basis points to 4.9 percent, marking the eighth consecutive quarterly decline. As conditions continue to improve, renancing and disposition options for owners will expand to some owners that were underwater two years ago. Despite a brief increase to approximately 2.3 percent during the period, the interest rate on the 10-year Treasury ended the rst quarter at about 2 percent. Capital continues to ow into safe-haven investments such as U.S. government debt amid lingering uncertainty over the eurozone. Fannie Mae and Freddie Mac will have unlimited nancial support from the federal government through the end of this year. However, Congress will weigh a number of proposals to sunset the GSEs over the next decade and privatize the secondary mortgage market. The entities accounted for 65 percent of apartment mortgage originations last year. Access to acquisition nancing continues to improve. Loans from portfolio lenders are issued at LTVs ranging from 70 percent to 80 percent, while the government agencies will work at the high end of the range on the highest-quality properties. All-in rates on mortgages of $3 million and more start in the mid-3 percent range for terms of ve years, while 10-year debt varies from the low- to mid-4 percent region. Rates for smaller assets can rise up to 30 basis points to 75 basis points higher.
Submarket
Dupont Circle/Adams Morgan Takoma Park Kensington/Wheaton Western Fairfax County Woodley Pk./Cleveland Pk./Van Ness Seminary Road/Landmark Hyattsville Downtown/Logan Circle Gaithersburg/Germantown NE Alexandria/Glebe Road SE Fairfax County Bethesda/Chevy Chase Northwest D.C./Georgetown Falls Church/Annandale Pentagon City/Chrystal City Northeast Montgomery Stafford County Frederick County Howard U./Mt. Pleasant/Brightwood Rosslyn/Ballston Prince William County Foggy Bottom Brookland/Ft. Totten Anacostia/Northeast D.C.
Vacancy Rate
2.1% 2.3% 2.5% 2.6% 2.6% 2.7% 3.1% 3.2% 3.3% 3.4% 3.4% 3.4% 3.4% 3.6% 3.8% 3.8% 3.9% 4.1% 4.2% 4.6% 4.7% 5.4% 5.7% 7.9%
Effective Rents
$1,565 $1,136 $1,336 $1,377 $1,853 $1,343 $1,094 $1,575 $1,269 $1,138 $1,371 $1,831 $1,640 $1,413 $2,027 $1,206 $957 $932 $1,217 $1,785 $1,100 $1,787 $996 $889
Y-O-Y % Change
3.5% 3.3% 3.2% 2.6% 3.7% 1.5% 1.2% 2.1% 1.2% 3.3% 2.2% 0.9% 3.3% 4.9% 2.4% 1.2% 4.6% 1.3% 2.6% 3.7% 3.5% -0.1% 2.4% 4.0%
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Art Gering
Senior Analyst Research Services For information on national apartment trends, contact
John Chang
Vice President, Research Services Tel: (602) 687-6700 john.chang@marcusmillichap.com Washington, D.C, Oce:
David Feldman
Regional Manager dfeldman@marcusmillichap.com 7200 Wisconsin Avenue Suite 1101 Bethesda, Maryland 20814 Tel: (202) 536-3700 Fax: (202) 536-3710
Price: $150
The information contained in this report was obtained from sources deemed to be reliable. Every eort was made to obtain accurate and complete information; however, no representation, warranty or 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 using seasonally adjusted quarterly averages. Sales data includes transactions valued at $500,000 and greater unless otherwise noted. Sources: Marcus & Millichap Research Services, Bureau of Labor Statistics, CoStar Group, Inc., Economy.com, National Association of Realtors, Real Capital Analytics, Reis, TWR/Dodge Pipeline, U.S. Census Bureau.