The Baltimore metro-area Class A apartment market has cooled off, according to a report measuring the sector’s performance in the first quarter of 2017.
Delta Associates, a commercial real estate research firm associated with Transwestern Co., found rents are down and vacancies are up, with variations across area submarkets.
“It’s slowed down a little bit, but it’s not a significant decrease,” said William Rich, director of Delta Associates’ multifamily practice.
The stabilized vacancy rate in the Baltimore metro area jumped 90 basis points from the same time last year, to 5.3 percent. The suburban markets experienced a 180 basis-point bump, to 5.4 percent, while vacancy in the city dropped by the same margin, to 4.9 percent.
Supply for top-tier apartments has also slowed. Across the metro area, supply is down by 8.6 percent this year compared to the amount of product in the pipeline last year. There are 8,000 units in various stages of development expected to be delivered in the next 36 months, which is an 800 less than at the same time last year.
There are markets that have seen an increase in the number of units being produced, however. In northeast and east Baltimore County, pipeline activity is up 25 percent, while in Annapolis, the number of units in development are up 12 percent.
Vacancy rates across the entire region are expected to increase from 4.4 percent currently to 4.8 percent by 2020. A good portion of the vacancies are coming from Baltimore city proper, Rich said, but the rates for the metro area as a whole are in comparatively good shape.
“(Vacancy rate) is a bit high compared to where its been historically,” he said.
Rents in the metro area are also down. Annapolis is the only submarket to post what the report dubs a “significant” increase in rent, with a 12 percent jump from the prior year. Rents in northern Baltimore County rents increased by just 0.4 percent. Rents fell in the southern suburbs by 1.4 percent and 0.4 percent in Baltimore city, which is generally the driver in the area’s multifamily market.
The report of a slowing Class A apartment market comes on the heels of some multifamily developers in the city expressing concern about supply outstripping demand. In recent months, some builders have worried the city has not created enough jobs within its boundaries that can support the rents for many of the units newly delivered.
Anticipated slashing of federal government spending under President Donald Trump’s administration is also anticipated to have a negative impact on an apartment market, where tenants are disproportionately employed by federal agencies and contractors.