After the turbulence of the COVID-19 pandemic, the multifamily market has begun to calm down in the Washington metropolitan area. 2023 was marked by positive shifts in rent growth, absorption, and vacancy. Here’s what DC apartment owners and operators should expect to see going into the remainder of the year and looking ahead to 2024.

1. Rent growth is on the rise

At 2.2 percent, year-over-year rent growth for the DC metropolitan area isn’t keeping pace with inflation, but it’s almost twice the national average. Nationwide, the multifamily market is struggling with an oversupply of new units coming online, met by weak demand.

The DC market has weathered these trends relatively well, with a healthy increase in year-over-year asking rent that’s only set to grow further, setting this market up to continue to outperform the nation as a whole.

2. Mid-priced apartments are driving growth

The bottom and middle tiers of the market are currently leading rent growth. One- and two-star apartments, according to CoStar’s ratings for building quality, showed the largest increases in the third quarter of 2023 with 2.9 percent year-over-year growth. Three-star apartments surpassed their four- and five-star counterparts at 2.3 percent rent growth, compared to only 1.9 percent in the luxury category.

In 2024, three-star apartments are expected to see the greatest rent growth, but four- and five-star apartments will be close on their heels, according to the CoStar outlook. These differences among price points are forecast to lessen as rent growth rises above 4 percent in 2024.

3. New renters are still entering the market

Population gains in the DC region have slowed since the pandemic but remain positive. In 2024, DC will continue to see new renters enter the market from in-migration as well as young adults moving out on their own.

4. The NoVa suburbs continue to shine

Northern Virginia submarkets continue to boast above-average pricing power. As of late 2023, NoVa submarkets took seven of the top 10 spots in the DC market for the largest year-over-year increases in asking rent. Other popular areas include the suburban Maryland side of the metro area, which offers access to life science employment hubs and has maintained relative affordability.

The only three submarkets where rent growth turned negative in the third quarter this year were Capitol Heights/Largo, Branch Avenue, and Leesburg. In these submarkets, year-over-year asking rent fell 2.2 percent, 2.5 percent, and 4.6 percent, respectively.

5. The local multifamily market is on the rebound

The DC market struggled through the pandemic, with rent growth turning negative from the second quarter of 2020 through early 2021. Since then the market has rebounded, and the most recent spring and summer leasing season has shown a continuation of this positive trend. Absorption has risen as vacancies have dropped.

In the four- and five-star category, vacancy rates have fallen since their double-digit peak in 2021, though they remain elevated at 8.7 percent, higher than for any other price point.

Even though DC has seen weaker growth in 2023 than last year, the market is on an upswing, with a rise in year-over-year rent growth from Q2 to Q3, and rent growth is forecast to grow to nearly 5 percent in 2024, according to CoStar data.