Vacancy rates for apartments in the Baltimore and Washington, D.C,. metro markets continued to fall in 2014, but a number of projects in the pipeline could lead to slower rent growth in some submarkets.
In Baltimore vacancy rates for Class A apartments declined in every submarket and rent increased from last year by .4 percent. Suburban developments were the primary driver of that growth. Rents in west and northwest Baltimore County were up by 3 percent and rents in northern suburbs increased by .8 percent, according to the year-end report from Delta Associates the research affiliate of commercial real estate firm Transwestern.
But rent growth was held down by a 10.5 percent drop in Harford County and rents in Baltimore fell 2.2 percent — primarily because of a 4.2 percent drop in rents downtown.
In the Washington market, the vacancy rate for all investment class apartments dropped by 4.6 percent. But the Class A vacancy rose to 5.6 percent. That was driven in large part because of the amount of new deliveries that came on line in 2014. The absorption rate of Class A apartments is expected to pick up because the improving economy should produce more renters moving out from their parents’ homes or no longer needing to live with roommates.
“Basically in Baltimore, the metro area as a whole, vacancy has decreased for Class A product, which is slightly different from what has happened in the Class A market in Washington. So the market seems to be tightening a bit in Baltimore,” said William Rich, multifamily practice director at Delta Associates. “However, especially in Baltimore City… there’s quite a bit of supply that is coming on line over the next 24 to 36 months and that will have an effect on rent growth and vacancy.”
In the Maryland suburbs of Washington there was record amount of absorption of apartments representing a 60 percent annual change in absorption. However rent growth in the Class A market was split between two categories. Rents in low-rise buildings increased by 1.2 percent but rents for high-rise apartments fell by 1.5 percent.
“There’s quite a bit of product coming on line over the next couple of years in the north Bethesda area of Montgomery County, which is going to more than double the amount of units that are currently existing in that submarket for the next couple of years. But that might be a potential area where there’s going to be some rent and vacancy concerns,” Rich said.