Multifamily Sigh of Relief?
For years, conventional wisdom has warned that the DC region was building multifamily too fast. (It falls on the regular warning spectrum somewhere between look both ways and wait to go swimming after eating.) But thanks to a tidal wave of young renters, it looks like like oversupply worries may soon be in the rear-view.
Delta Associates CEO Greg Leisch says despite the DC region's exuberant multifamily construction, the "tremendous migration of Millennials" is helping demand keep pace. Greg tells us that in the 12 months that ended this past Tuesday, the region absorbed over 13,000 units, compared to the 25-year historical average of about 5,300 per year. One theory, Greg tells us, is that since Baby Boomers are retiring, work-hungry Millennials are coming here to take their jobs. (Which also accounts for why job growth is meager in the region, but that's another story.)
Greg made these comments moments ago at Delta's annual multifamily awards, where he'll also report that we're not out of the woods completely. "This is the beginning of the end of our supply problem," he tells us, but even high-quality new product can fail if it's not in the right location or lacks the right amenities. Vacancy is still high, too, he says, and the region will still be a bit oversupplied for another two years or so. But the good news is that vacancy has flattened in the past year, compared to rising the last three-and-a-half years. (Here are the Justice Park apartments in Columbia Heights, which just delivered this week.)
There's even more good news out there, this time in the condo world. (Here's 3409 Wilson Blvd, a former extended-stay hotel that Goldstar Group and Finmarc Management have just turned into for-sale residential units.) New condo unit prices are up 11.9% in the past 12 months, Greg says, which is three times the rate for new townhomes and single-family homes. His other keys for residential developers, going forward: Selectively accumulate assets, refinance what you've already got, renovate Class-B and C holdings, develop selectively, and set yourself up for the next cycle.
