Slow job growth proved a slight drag on the Baltimore metro area’s multifamily rent growth, but demand for rental properties remained solid, according to a report released by CBRE on Tuesday.
Rents year over year are up 3.4% in the suburbs but increased by less than 1% in the city. That rent growth, according to CBRE, was the first the city posted in six quarters.
“Frankly, it’s steady as she goes,” said Michael E. Muldowney, executive vice president with CBRE’s mid-Atlantic multifamily investment sales team.
Vacancy in metro region apartment buildings fell to its lowest levels in four years, dropping to 4.1%, according to CBRE. Buildings currently in lease report renting 18 units a month on average.
Despite relatively strong rent growth, CBRE did find slower job growth retarding the multifamily market’s performance.
Overall the metro area added 11,000 jobs through the 12-month period ending in June 2019, but that’s below the long-term annual average of 14,400.
But fields adding jobs in the region are in higher-paying sectors. Positions in the professional and business services drove job growth, adding 6,000 positions. Education and health services also added 4,300 positions.
Not all job types in the region were prospering. CBRE’s researchers found jobs in the trade, transportation and utilities sector fell by 2,900 positions. Following close behind, the retail sector regionally lost 2,100 jobs.
When considering the impact of jobs on the multifamily market, Muldowney said that for every five jobs created at least one, in some markets two, of those people hired need to rent an apartment.
Donald C. Fry, president and CEO of the Greater Baltimore Committee, said in a statement he’s heartened by growth in high-paying jobs. Given the strength of the region’s institutions and proximity to the federal government he said the region’s expected to fare well in the future.
“An encouraging sign was Baltimore’s growth in the tech sector. The report compares national markets in the tech sector and highlights the region’s growth from 2012 to 2019 at 17.9 percent, among the highest cited in the report,” Fry said.
The number of new units in the pipeline has also slowed after the delivery of new units reached record highs in early 2018. There’s still a significant amount of building in the area, with 7,040 units expected to deliver in the next 36 months, boosting the metro area’s multifamily stock by nearly 3%.
In the first half of 2019 developers delivered roughly 950 units. Of those units 60% were in Baltimore, which CBRE attributes to builders’ confidence in urban growth.
While rents in other city submarkets were sluggish they increased by 1.5% in downtown Baltimore, which outpaced the five-year average rent growth of 1.2%.
Kirby Fowler, president of the Downtown Partnership of Baltimore, said the area’s still transitioning from commercial district to residential neighborhood. He pointed to retail as a need for Baltimore’s fastest growing neighborhood. Demand for living space downtown, which grew from 1,700 residents in 2000 to more than 8,000 in 2018, is expected to remain strong because of the neighborhood’s diversity and authenticity, he said.
“(People) can see through superficial copies of an urban environment,” Fowler said.
But whether the apartments are in the city or the suburbs, demand for multifamily units is expected to continue.
One significant reason is surging home prices. While home prices declined in August compared to the previous two months, according to data from MarketStats by ShowingTime based on Bright MLS listing activity, the metro area’s median price of $289,900 was 3.5% higher than the same month the previous year.
There’s also been a shift toward renting following the 2008 recession, Muldowney said. While the number of residents buying homes has rebounded it’s still not at pre-recession levels, he said. Adding amenities to modern apartment buildings make them an attractive living option.
“I occasionally threaten to gather the kids at dinner and tell them, ‘You better shape up or (my wife and I) are selling the house and moving into an apartment,'” he said with laugh.