As the spring leasing season approaches, optimism about Baltimore’s multifamily sector continues following a strong 2014.
Not all the news coming from the multifamily market nationally has been good. Some recent developments, such as higher vacancy rates in markets like Washington, D.C., and multifamily focused Real Estate Investment Trusts not performing as well on Wall Street, have created some concern about multifamily properties’ prospects. But local experts aren’t stressing over signs that multifamily may be heading toward a slowdown from its strong performance in the wake of the 2008 financial crisis.
“The question that everybody is asking is, is the supply going to be more than the demand… But we also said that three years ago, and we’re still full at all of our buildings,” said Steven Bloom, operating partner for PMC Property Group in Baltimore.
PMC Property Group has been aggressive in the Baltimore multifamily market, renovating a handful former buildings in and around downtown. The group is also in the process of rehabbing the 26 S. Calvert St. project and intends to start leasing the first phase of the 167 unit project this May. Two other projects, 10 N. Calvert St. and 10 Light St., are expected to be delivered this spring and will add hundreds of new units to the market.
“I’m excited to see what happens. These are the first substantial apartments being delivered between Pratt and Fayette [streets]. It’s going to be very interesting to see how it turns out,” said Kirby Fowler, president of the Downtown Partnership of Baltimore. “Our expectation is that these properties will do very well based upon the openings of buildings in the recent past and the current occupancy rates.”
Projects outside of downtown are also sprouting up with proposals for major developments, such as replacing the Della Notte site with a mixed-use project that includes 243 apartments. Point Street Apartments at Harbor Point would add another 289 apartments. Several mixed-use projects are also in the works on the city’s long maligned West Side, and there’s even a proposal under consideration to build apartments as part of a mixed-use project at the failed Old Town Mall site.
Recent statistics about the area’s multifamily market back up the optimism about the multifamily sector in Baltimore. According to AXIOMetrics Inc., a Dallas-based data firm that tracks multifamily development, rents in the Baltimore-Towson Statistical Area have increased, though not as fast as most markets in the country. The annual effective rent growth was 2.56 percent, that’s a 120-basis point increase from the 1.36 percent last January. The Baltimore area also posted a 94.65 percent occupancy rate in January, a small increase compared to the same time last year.
Compared to Maryland’s D.C. suburbs, the multifamily market in Baltimore is in much stronger shape. AXIOMetrics reports that effective rent growth in the Bethesda, Frederick and Gaithersburg statistical area was only .54 percent. The company also projects that with .4 percent job growth expected in that area it will remain difficult for landlords to raise rents.
Meanwhile, with stronger job growth anticipated in the Baltimore area — there were 29,000 jobs added in the market — demand is expected to surpass supply through at least 2016. About 50,000 new jobs are expected to be created through 2016 in the area, and it’s anticipated that will be more than enough to absorb the 4,700 new units that could be delivered during that time frame.
But trying to predict the future is notoriously difficult, and statistics don’t always produce the most accurate predictor of the results a market will produce. Sometimes recent history is the best indicator of how a market will perform.
“You can guess all you want with statistics and looking to the future. I just know the last two projects we did we leased up and we’re 100 percent leased,” Bloom said.