Today’s apartment market performance in Virginia Beach-Norfolk-Newport News ranks among the strongest across the nation.
Furthermore, the more you slice and dice the data the more you’re apt to like it, as there’s stunning consistency in the impressive stats across neighborhoods and property sectors. Opportunities for success appear to lie not just in one or two investment strategies, but in a wide range of approaches.
The Economy Nears Recovery
When the U.S. economy downsized in March and April of 2020, Virginia Beach’s job count backtracked by 9.4%. That’s certainly a significant loss, but it was less than the hit suffered in most places. The big role that the federal government and private-industry defense-related firms play in the metro likely minimized the pain.
The pace of rebound that occurred in the remainder of 2020 was rapid. The latest stats show employment off from February’s high by less than 2%, with just 14,000 or so jobs left to go in getting back to the pre-pandemic total. The loss that remains consists of a few jobs in most economic sectors, rather than the giant holes for select industries (usually hospitality and retail trade) seen in many other markets.
Occupancy and Rent Growth Both Look Good
Demand for about 2,700 apartments in metro Virginia Beach in 2020 surpassed completions that were limited to some 1,900 units.
By the end of the year, then, occupancy was up to 97.5%, rising 100 basis points from the late 2019 figure.
Helping the occupancy result, local renter retention when existing leases expired notably topped the national norm. As in most of the rest of the country, resident retention in Virginia Beach surged in the early days of the pandemic, here getting as high as 72%. While those retention numbers now have come off the peak performance, they’re still sky high relative to the past average. Among those with leases expiring in 4Q 2020, two-thirds of the households stayed in place.
With occupancy so strong, property owners and operators in Virginia Beach were able to really push rents. The December stats show effective asking rents for new leases up by 5.3% annually on average, gaining momentum from yearly pricing growth that was near the 3% mark in late 2019. Growth of 6.5% in Class A properties led the way, but the increase was also impressive at 5.7% in the Class B stock and solid at 2.8% in the Class C inventory.
Rent discounts are rare in this market, reported for a mere 3% of the stock as of December.
In another very telling sign of overall apartment market health in metro Virginia Beach, this is one of the few areas across the country where there’s been no increase in missed rent payments at all during 2020. In fact, RealPage collections info that begins in April 2020 shows that the share of households making rent payments edged up by 30 basis points on average, viewed relative to results for the same time in 2019.
Will Construction Remain Modest?
The biggest downside risk for metro Virginia Beach’s apartment sector over the near term is probably just a run-up in building activity. While annual completions in 2018-2020 were tame at an average of about 1,400 units, this is not always a low-supply market. Looking back over the past couple of decades, deliveries at times have well more doubled the volumes from the past three years.
For more on the markets that have shown resilience throughout the COVID-19 pandemic, watch the recent webcast: Up Close and Local: New and Improved Markets.