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Southwest/Navy Yard Multifamily Submarket Continues to Absorb New Supply

CoStar Market Insights: Strong Quarterly Absorption in Southwest/Navy Yard Dropping Vacancies
September 12, 2018
The 148-unit Incanto in Washington, D.C.



Across the board, the Southwest/Navy Yard’s key performance indicators are trending upward. Occupancies as of September were still recovering from the sustained supply over the past few years, but strong quarterly absorption slowly brought the vacancy rate lower.

The Southwest/Navy Yard absorbed more than 1,000 units for the seventh straight quarter. At the same time, another 1,300 units delivered over the past 12 months. This lull in deliveries -- relative to what the submarket was experiencing -- gave way to the continued vacancy compression, which began in earnest in late 2017. But as the past few years demonstrate, vacancies are volatile. With another 4,000 units under construction and delivering over the next eight quarters, and the usual fourth-quarter slowdown in leasing, an erratic vacancy rate could be expected.

The submarket experienced a lull in construction through the first eight months of the year. As of September, just 500 units delivered, down from the 1,500 units that delivered through the first three quarters of 2017. That lull should be short lived as a handful of properties are expected to open in between now and the end of the year.

Leasing in new properties bodes well for the next influx of supply. The 4-Star, 334-unit Agora delivered in January 2018. The property was about 60 percent occupied in early September, leasing about 22 units per month. Older buildings -- built in late 2017 -- are beginning to near stabilization. The Incanto and Insignia on M were 80 percent occupied, and One Hill South was more than 95 percent occupied.

Healthy leasing and the lull in supply has given way to falling vacancies. As of September, the vacancy rate hovered around 11 percent, a marked improvement from the high 18 percent range experienced last year. Southwest/Navy Yard has transformed into one of the best places to live in Washington, D.C. Based on absorption trends and developer commitments, it seems that the submarket is poised for long-term growth. With the amount of under-construction units, it will take continued movement from current D.C. residents and new migrants to settle in the submarket to absorb the remaining units. Because of the sheer amount of supply, vacancies in the near term are likely to remain elevated.


CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

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