The increase tops the peaks of previous years
According to CoStar, a leading commercial real estate information firm, there were an estimated 174,917 occupied units in all classes of market rate apartment building in September 2017, an increase of 5,433 over the prior year. This was the largest one year gain since 2001, the period covered by the data base. The 5,433 one-year gain exceeded the annual gains that occurred before the Great Recession and following the relaxation of sequestration restraints.
In 2005 DC’s population started to increase, with the city adding 125,000 residents by 2017, a 22% increase. Not surprisingly, this growth had an impact on the market for apartments. From 2005 to 2017.3 the net inventory of units increased by 35,615. This increase in supply was almost matched by growing demand as occupancy grew by 33,443. The overall vacancy rate rose only slightly—from 4.6% in 2005 to 5.1% in 2017.3.
The balancing by market forces of inventory and demand evident over the past decade is consistent with the modest decrease in the construction of new units that has occurred recently. In September there were 13,022 new units under construction, a decrease of 630 from a year earlier and of 1,687 from the peak pace of 14,709 in March 2017. While occupied units rose sharply over the past year, inventory grew even more: a 6,727 net increase in inventory versus the 5,443 increase in occupied units. The vacancy rate in 2017.3 for all units also rose somewhat—to 5.1% from 4.7% a year earlier.
As noted in the accompanying chart, new construction began to accelerate in 2010. With some ups and downs, this was soon followed by annual increases in net inventory and in occupied units that have carried to the present time. Most of this activity involved Class A apartments. In the 7 years from 2010.3 to 2017.3, 88% of the net increase in apartment units and 84% of the increase in occupied units were accounted for by152 new Class A buildings. (Class A buildings are new or newly renovated, well located, generally larger buildings with higher rents.) An increase of 69 Class B buildings accounted for about 15 % of the gains in inventory and occupancy. The number Class C buildings, representing about 38% of the District’s inventory of market rate units, declined over this time. Vacancy rates rose for Class A buildings, which require long lease-up periods, and fell for both Class B and Class C units.
From 2009 to 2012, the three years in which DC experienced the largest annual increases in population over the past decade, the total increase in occupied apartment units for the three years was 4,987 (see the shaded area in the table below). This was less than the increased occupancy that occurred in the last 12 months. This suggests there have been some changes in the connections between a growing population and the city’s housing stock over the past 10 years or so. In the middle part of the decade of the 2000’s, more of the increase in population may have been accommodated by group homes or taking in roommates, by changes to single family or other smaller structures, or by owner-occupied units. Census Bureau estimates of DC’s population in 2017 will not be available until December, so comparison of population and housing unit changes over the past year is not yet possible. The ways in which the District and the owners of its housing stock adapt to changing demographics and housing patterns will no doubt continue to be an area of great interest.
About the data. The information is from CoStar’s historical data bases of market rate apartments which goes from the first quarter of 2000 to the third quarter of 2017. The data includes the total for all apartment buildings as well as for buildings classified as Classes A, B, or C. CoStar Group, Inc. is an American commercial real estate information and marketing provider with headquarters in Washington, DC. Information in the CoStar data base is undated on a continuous basis.
The information here was included in the District of Columbia Economic and Revenue Trends report for October 2017, which was issued by the Office of Revenue Analysis of the Office of the Chief Financial Officer of the Government of the District of Columbia.