Rents Start to Drop Around the DC Metro

• February 3rd 2009

by Will Smith

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Residential rents in and around DC softened significantly in 2008, according to Alexandria-based real estate research firm Delta Associates. The drop in rents was most pronounced among Class A properties in DC proper, which saw rents fall 0.7 percent from December 2007 to December 2008. While 0.7 percent might seem nominal, the last time Delta recorded a rental decline at all in the DC metropolitan area was during the post-9/11 recession.

Rents are expected to soften even more in 2009, according to Delta vice president Grant Montgomery, who noted that the recent figures only incorporated three months of the financial crisis that began in September. Delta’s next quarterly report due in April will look at rents from March 2008 through March 2009, and the numbers could be even bleaker.

When Class A rents from the entire metropolitan area are added to those in DC proper, the picture is slightly better: they grew 0.1 percent. In what seems like good news, residential rents for the entire DC metro area — Classes A, B, and C — grew 2.6 percent. However, that number has historically been around 4.5 percent.

The problem, explained Montgomery, is oversupply, particularly among Class A properties. Class A are the new, high-end residential buildings with lots of amenities. There are many Class A projects that were originally planned as condos, but have had to convert to apartments because of the current buying climate. Because that has happened so much amid slackened demand for condos, there is a glut of Class A rentals, particularly within DC itself.

“We’ve got 51 rental projects in the metro region which are brand new and still leasing up.” Montgomery told UrbanTurf. “That’s huge.” To put those numbers in perspective, Montgomery said there were only 12 new rental projects leasing up during the height of the condo market in the first quarter of 2006.

This article originally published at http://dc.urbanturf.production.logicbrush.com/articles/blog/rents_start_to_drop_around_the_dc_metro/513.