According to the recently conducted Washington DC Apartment Research Report for First Quarter 2015, high demand for rental property in the Washington DC metropolitan area has led to the highest number of apartments in more than a decade.

From the Washington DC Apartment Research Report:

Vigorous rental demand in the metro core drove developers to deliver the highest number of apartments in more than a decade this past year. Despite the level of construction, vacancy rose just 60 basis points as new properties lease up. The pace of job growth, although below the national average, is steady as a result of the federal government, defense contractors and lobbyists, and multiple Fortune 500 companies. This stable environment is attracting millennials and empty nesters to the D.C. core, where they choose to rent in submarkets proximate to their jobs, shopping, entertainment, and public transportation. The urban focus of these renters has allowed operators in the core of the district to nearly eliminate concessions. In 2015, the apartment market will remain slightly oversupplied, but an increase in employment growth will boost rental demand, keeping the metro’s rental market tight. As new stock is absorbed, apartment demand in the metro will push rents up 1.6 percent year over year.

National investors are scouring the market for available multifamily assets, motivated by excellent demographics and steady rent growth. These buyers are seeking assets with appreciation potential in areas such as H Street and 14th Street in the center of the metro. While still increasing in price, Class A properties in the heart of the metro are leading investors to exercise more caution due to robust construction of new rentals and cap rates that can push into the mid-4 percent range. Meanwhile, local investors have been bidding aggressively on Class B/C assets with first year yields in the high-5 to mid-6 range. These buyers recognize the ability to reposition or rehabilitate properties in order to achieve both appreciation and strong first-year yields. As a result, rent controlled properties with high vacancy will see higher pricing due to the potential for buying-out tenants and removing rent restrictions. Overall, investors will remain active in the market, but will begin to focus on fringe areas such as Anacostia as the area is redeveloped and properties in the core become less attractively priced.

2015 Annual Apartment Forecast

Employment: Job growth will accelerate this year as the market generates more than 48,500 positions, a 1.6 percent increase year over year as biotech and government add workers to their payrolls. Last year, 1.4 percent jobs were added.

Construction: After the quickest pace of development in more than a decade, building activity will slow this year to 12,800 rentals. Construction is widespread, while Northeast D.C. and Navy Yard/Capitol South are slated to receive the largest share of new stock.

Vacancy: Large increases in supply over the coming year will outpace strong demand in the metro, causing vacancy to tick up 20 basis points to 5.8 percent. In the same period one year ago, vacancy rose 50 basis points.

Rents: Robust demand in the core of the metro will push rents up 1.6 percent to $1,611 per month this year, nearly half the pace of last year’s advance.

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Washington DC First Quarter 2015 Apartment Research Report Reveals Vigorous Rental Demand in the Region