The Bethesda-Chevy Chase area is widely viewed as one of the most popular and prestigious communities in the metropolitan region, and its multifamily and office development continues to attract attention.
Class A apartments in the area are among the most well-appointed and priciest in the region. During the first three months of this year, high-rise Class A effective rents in Bethesda averaged $2,396 a month, or $2.60 a square foot. Overall vacancy in the area is 7.4 percent, which while high by historical standards is better than any other Class A high-rise market in suburban Maryland. As a result of the elevated vacancy rate, rents over the past year have decreased 6.9 percent. Currently concessions make up 4.3 percent of face rents, which is average for Class A high-rises in suburban Maryland.
There are 320 units under construction, and an additional 1,003 units planned to open over the next 36 months. If all of the units make it to market, Bethesda-Chevy Chase may have more available units than takers, driving up vacancies and pushing rents down further.
Since 2003, 962 new condominium units have been sold in the area. There are two condominium projects in the pre-marketing phase that will begin sales later this year, for a total of 115 units. Two additional projects with a total of 225 units are planned to begin sales within the next 36 months, with another 432 units planned longer-term. A portion of the 198 planned multifamily units in the pipeline may be built as condos.
The 11.3 million square foot Bethesda-Chevy Chase office market is centered along Wisconsin Avenue on the northwest boundary of the District. About 768,000 square feet of the total is available to lease, which equates to a direct vacancy rate of 6.8 percent as of the first quarter. If sublet space is added, the vacancy rate rises to 7.9 percent, significantly lower than the countywide rates of 11.3 percent and 12.2 percent, respectively.
During the first quarter, 23,000 more square feet were leased than during the previous quarter. The average effective rent in Bethesda-Chevy Chase was $28.95 per square foot at the end of the 1st quarter, up from $28.80 per square foot at year-end 2011. Rents increased 0.5 percent during the first quarter, after rising 0.7 percent during 2011.
Michael Donnelly is a senior associate at Delta Associates. Staff at Delta Associates contributed to this article. For more information, please visit www.deltaassociates.com.