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Vacancies Falling, Strong Absorption in Downtown D.C. Multifamily Submarket

CoStar Market Insights: Deep Dive into Demand in Pre-eminent D.C. Submarket
September 7, 2018

The 93-unit Apartments at Westlight in Washington, D.C.

Occupancies in downtown Washington, D.C. are above the 10-year average, boosted by strong net absorption. This time last year, the increase in supply pushed vacancies higher, but steady absorption through the first few quarters of 2018 led to an increase in occupancy.

Most properties built since 2015 leased quickly and were fully occupied as of September. The handful of new builds this year have taken longer to absorb. Of the 800-plus units that delivered this year, almost 300 are still empty. Most of that vacancy is from new apartments like the Apartments at Westlight and The Lurgan, which were both built in June. The Apartments at Westlight, located in West End, was leasing about five units per month; The Lurgan leased about 15 units per month.

On a neighborhood-by-neighborhood basis, occupancies are reactionary to how much supply was delivered. In Shaw, about 150 units delivered over the past 12 months, but vacancies remained at just 5 percent. Logan Circle and DuPont Circle received similar levels of construction, and both had vacancies around the 5 percent range. Mount Vernon Triangle had more than 350 units deliver over the past 12 months, but vacancies of just 6 percent indicate strong demand for these units. The West End vacancy rate was nearing double digits, as more than 100 units delivered over the past 12 months.

Strong occupancy was led by above-average absorption over the past 12 months. Most of the 1,000 units absorbed came from the brand new apartments. But even older properties were filling vacant units, likely a testament to the desirability of being in downtown D.C., regardless of price and building.

Absorption outpaced 12-month deliveries, as only about 800 units delivered. This was a notable increase for any four-quarter total since the end of 2015. Logan Circle, Shaw and Mount Vernon Triangle were the focus of development. Foggy Bottom, Downtown and Chinatown haven’t added any units since 2015.

The pipeline remains thin with just a handful of properties under construction, none of which total more than 100 units. Again, these projects are focused in Shaw and Logan Circle. Proposed projects, namely on the east side of the submarket in areas like Shaw and Mount Vernon Triangle, have the potential to add a significant number of new units to the submarket. CoStar was tracking more than 1,000 units in the planning stages as of September. But how many of these plans will go to ground remains the questions.

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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