Baltimore Apartment Construction Slowing Despite Falling Vacancy, Rising Rents

Despite falling vacancy rates and rising rents across the entire Baltimore metro area, the pipeline of future apartments is declining — except in the city's affluent southern suburbs.

The average vacancy rate for stabilized apartment buildings in and around Baltimore in the second quarter was 1.7%, down from 2% the year before, according to Delta Associates' Q2 report. The rate was even lower in the suburbs, which didn't see a single new apartment delivered in the last 12 months.

While rents went up more than 10.5% year-over-year in both Baltimore City and its suburbs, the pipeline of future apartments is only expanding in the southern part of the area, as new projects from Odenton to Columbia have increased the 36-month pipeline from 1,491 units at the end of June 2021 to 1,637 a year later.

By comparison, the northern suburbs' pipeline shrank from 914 to 391 and the project number of apartments coming to the city in the next three years shrank from 2,715 to 2,278. 

“Only 275 [units] have come on the market in the Baltimore metro area over the past 12 months, which is a far cry from the over 1,600 units that delivered in the prior year,” Delta’s report stated. “The lack of new product has resulted in a 57% decrease in absorption over the year.”

The extra supply is much-needed, as the 12-month period ending with the second quarter of this year saw 306 units absorbed in the southern suburbs compared to 1,308 units absorbed the previous year.

Howard County, and in particular Columbia, is where the most new construction is concentrated, especially at The Howard Hughes Corp.'s Merriweather District, anchored by the Merriweather Post Pavilion and located just south of the developer's Columbia Town Center.

Construction is already underway at Howard Hughes' 472-unit Marlow project, which it expects to start leasing soon and complete by the end of this year, a spokesperson said. The apartment project is located just south of the amphitheater and is set to include roughly 32K SF of retail.

Plans at the Merriweather District were accelerated at the beginning of last year, after the pandemic-induced flight to the suburbs gave Howard Hughes executives confidence to invest more heavily in master-planned communities like Columbia.

"As we advance forward, we expect Downtown Columbia to be a driving force with the development of future office, retail and multifamily assets backed by historically strong demand," Greg Fitchitt, president of the developer's Columbia plan, said in a statement last year.

In acknowledgment of the high demand for housing, Howard County has also begun to identify and finance affordable projects in Columbia. That includes the 76-unit Patuxent Commons, led by Mission First Housing Development Corp., and the New Cultural Center, which features 174 units and a ground floor with public-facing cultural amenities.

The southern suburbs have other major projects on the boards as well. In Anne Arundel County, a workforce housing development from Conifer Realty, Blue Oaks at Odenton, is set to transform a defunct retail center into 150 units of affordable housing. 

While momentum is building across Baltimore's southern suburbs, it is playing out unevenly in the city. 

While the Federal Hill/Locust Point submarket had the only project that delivered units to the market this year — Wood Partners’ 275-unit Alta Federal Hill — its three-year pipeline dropped from 1,222 units last year to just 351 this year, according to Delta. The neighborhood's effective rents are still a half-percentage point below 2017 levels, compared to the city's average rent, which is 0.6% higher than it was five years ago.

On the other hand, the Fells Point/Inner Harbor submarket saw its pipeline grow from 527 to 1,381 units between June 2021 and June 2022. National developers like Greystar, which is building its first project in Baltimore, and D.C.-area players like Elm Street Communities and Urban Investment Partners have bolstered the area.

When completed, Greystar's the Elan Brewer’s Hill project is slated to feature 500 market-rate units and 23K SF of amenity space as part of 28 Walker Development's Collective at Canton master-planned community.

Elm Street is developing a 285-unit project at 2001 Aliceanna St. that’s scheduled to deliver by the end of this year, and UIP is planning to deliver a 290-unit building in the Inner Harbor next year, according to Delta.