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Market Dynamics provides an examination of key influences on apartment industry performance. You’ll value the perspectives and insights from the MPF Research team, including Greg Willett, an industry expert widely known for his knowledge and expertise in the field. View Market Dynamics online or Sign Up for e-mail delivery as new issues are posted.

DC's Neighborhood-Level Performance Leader
October 30, 2009
by Greg Willett

Greater Washington, DC continues to rank as the country's healthiest really big apartment market. Demand for almost 2,600 units during 2009's 3rd quarter surpassed completions that totaled 2,120 units, so occupancy inched up a tenth of a percentage point between June and September to a rate of 94.1percent. That occupancy figure tops the national average by 2 full percentage points. Effective rents are being cut in the metro, but an annual decline of 1.4 percent during the year-ending fall 2009 looks quite a bit better than the country's typical loss of more than 4 percent.

There aren't any individual neighborhoods across metro Washington where apartment occupancy struggles are especially severe by national standards. Only Reston/Herndon and Prince George's County have occupancy a little below the 93 percent mark. Similarly, rent cuts by submarket tend to be pretty mild, though both Alexandria and Central Fairfax County have seen effective pricing come down by 4 percent or more over the past year.

Even with no real disaster zones in greater Washington, some neighborhoods obviously are performing better than others, and Loudoun County currently ranks at the very top of the list. Loudoun County's September 2009 occupancy rate stood at 96.1 percent, and effective rents over the past year proved basically flat (edging up 0.1 percent).

A top dog position for Loudoun County is perhaps surprising given that some of the local headline-grabbing employers have experienced difficulties. Most notably, it's probably been several years since you've heard that “You've Got Mail” message, so the employee count at AOL's primary corporate campus in the Loudoun County city of Sterling now is a fraction of its peak tally.

What seems to be really helping Loudoun County's apartment market performance is that the area is one of the few spots across metro Washington, DC that isn't in the process of digesting any new supply at all. After completions in the area proved fairly aggressive earlier in the decade, Loudoun County hasn't received any new product since fall 2007.

Loudoun County will see new supply return during the next few months. Two properties that total 748 units are presently under construction, with completion scheduled around mid-2010 for both developments. Since Loudoun County's total apartment base is small, just under 11,600 units by MPF Research's count, having any product in initial lease-up does tend to register at least a little impact on overall occupancy. The neighborhood's tenure as greater Washington's tightest submarket, then, probably will be short-lived, but near-term inventory growth certainly shouldn't be enough to send performances off the rails for an extended period.

Market Dynamics is an examination of key influences on the apartment industry by MPF Research, the industry’s most trusted source of apartment market intelligence. To receive the latest Market Dynamics newsletter in your e-mail inbox, please click here to subscribe.

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