Competition Slows For Baltimore-Area Apartments

The Baltimore area's apartment market is showing signs of cooling as competition from renters slows and as thousands of new units continue to deliver, according to recent research. 

Researchers at RentCafe found fewer residents per apartment looking to rent in recent months than last year. In a report released this month, RentCafe tallied 10 renters jockeying for each available apartment, down from 14 renters vying for each vacant unit last year. 

Meanwhile, the inventory of available apartments is projected to expand by 1.3% from June to the end of the year, according to Marcus & Millichap.

"More than 600 units were taken off the market on net [between April and June]," according to Marcus & Millichap researchers. "However, that figure remained well below the second quarter average for the metric in the decade leading up to the health crisis."

Researchers also found the number of new units opening in the Baltimore area is slowing. Last year, Baltimore’s 3,631, Towson’s 885 and Owings Mills’ 551 units were the most delivered in the metro area. Now, according to RentCafe, "Baltimore proper is the only busy builder in the area with 2,562 apartments set for completion by the end of this year."

With fewer renters competing for units, according to RentCafe, the average duration apartments remained vacant increased from 37 days in 2022 to 43 days this year. Adding to the vacancy, the number of renters renewing leases also fell by more than 4%, causing occupancy to drop from nearly 96% to less than 94%.

But researchers found some positives for developers delivering new or recently converted apartments. The primary drag on the market, particularly the vacancy rate, stemmed from the performance of lower-tier apartments.

As of June, vacancy for Class-C apartments stood at 5.7%, the highest vacancy rate of all multifamily classes in the Baltimore area, according to Marcus & Millichap. 

"The more affordable workforce housing segment of the market has been most affected in recent quarters, as the ending of the statewide eviction moratorium and inflationary pressures have significantly hindered leasing in lower-tier apartments," according to the Marcus & Millichap report.  

Rents have continued to climb, and it is expected those increases will persist through the end of the year, but the pace of growth has moderated, Marcus & Millichap reported.  

The researchers found that effective rent grew by 2.5% year-over-year in June, putting average effective rent on pace to reach $1,690 per month by the end of the year.

RentCafe analysts estimated the average rent in Baltimore is $1,557 a month, which is $169 a month below the national average.

"Rising vacancy and competition from new properties will hinder rent gains in 2023, as the growth rate falls below the long-term average of 3.3 percent," Marcus & Millichap's report says.