A report released by Delta Associates, a commercial real estate consulting firm, paints a fairly rosy picture for the near future for apartments in the Baltimore region.
The primary reason for that optimism is that the economy is expected to generate above-average job growth for the foreseeable future, according to the Mid-Atlantic Class A apartment market report released by Delta Associates on Wednesday. Baltimore is expected to add 50,000 new jobs between this year and 2016. That would outpace similar metro areas such as St. Louis, Milwaukee and Cleveland.
“We expect the Baltimore metro economy to continue improving through the remainder of 2014. Jobs continue to be added to the metro area at a rate above the 20-year annual average and we expect the unemployment rate to remain below the national rate,” the report reads.
The positive projection for the area job market is good news for multifamily developers. Developers have been building apartments at a steady clip, buoyed by projections of a changing workforce unable to buy houses because of a tight credit market following the 2008 recession.
Baltimore has encouraged apartment development by creating a 15-year tax credit aimed at certain sections of the city such as downtown. The Baltimore City Council is also expected to give final approval to a 10-year apartment citywide tax credit for the creation of at least 20 units.
But in recent months some real estate experts have worried if the job market would be strong enough to support the growth in apartments, especially in Baltimore.
In March, Jay Denton, of Dallas-based Axiometrics Inc., raised concern about job growth in the Baltimore market being sufficient to meet the supply being built in the area. At that time his firm was predicting job growth to slow in the area from 2 percent in 2013 to 1.78 percent in 2014.
Bob Aumiller, principal of MacKenzie Commercial Real Estate Services LLC, also raised concerns about job growth in the area and its ability to support an expanding multifamily market.
“My biggest concern would be in the multifamily sector. People need to have jobs to rent, and there seems to be a tremendous amount of apartment conversions and new construction in that arena. I think that could be the next issue that we face,” Aumiller said last month.
Yet Delta Associates data reveals reasons to be optimistic about the prospects for Class A apartments in the near future. In the Baltimore metro market overall vacancy dropped from 10.9 percent in June 2013 to 7.5 percent in June 2014. That drop in the region was led by a drop in overall vacancy in Baltimore, which plummeted from 18.4 percent in June 2013 to 8.1 percent in June 2014.