Baltimore Among National Leaders In Apartment Conversions Despite Slow Rent Growth

Baltimore remains a national leader in turning unwanted office space into apartments, according to a recently released report. Yet the multifamily market continues sending mixed signals about its long-term health.

RentCafé's annual Adaptive Reuse Report released Tuesday placed Baltimore No. 4 out of the nation's top 10 markets for apartment conversions last year. According to the research, developers in Charm City built 395 apartments in properties converted from other uses.

Baltimore's ranking increased to No. 3 in the nation when only counting the number of apartments created from conversions of office space. That is up from last year when RentCafé ranked Baltimore at No. 8 among its 10 cities with the most units created from office-to-residential conversions. 

Yet, Baltimore's rise stems from a slowdown in conversions nationwide rather than a jump in the number of transformations locally. Developers in Baltimore created the same number of apartments as the year before, according to RentCafé.  

Year-to-date rents grew 1.9% nationwide through June, but that growth is the second-weakest rate since 2010 and is "modest-at-best" in a historical context, according to RealPage. 

The Northeast, which includes Baltimore, experienced a 3.2% rent increase year-to-date, and the region had the slowest absorption of any region, according to RealPage.

The Baltimore metro area's average effective rents grew 1.4% in the year ending March 31, according to Delta Associates. Baltimore absorbed just 157 Class-A apartments in the 12 months ending March 31. And absorption in the overall metro area plunged from 2,205 units the year before to 284 units during the 12 months ending March 31.

Delta Associates President Will Rich told Bisnow in May that a lack of supply and not slacking demand caused the steep drop-off in absorption locally. 

"Lack of new product in the marketplace, not just in Baltimore City, but throughout the metropolitan area, has resulted in the lack of absorption in the market over the past year, compared to last year and pre-Covid," Rich said.