East End, Shaw, Columbia Heights real estate markets showing strong growth

September 2, 2012

Construction, redevelopment and condominium conversions continue to revitalize the District’s East End neighborhood.

Apartments in the East End fall into two areas in the city — central D.C. and Columbia Heights-Shaw. These two areas are among the strongest in the District, with low vacancy and robust rents. As of the second quarter of 2012, high-rise rents in central D.C. average $2,794 a month, or $3.29 a square foot.

Rents average $2,510 a month, or $3.05 a square foot, in the Columbia Heights-Shaw area, while rents for the District as a whole average $2,613 per unit or $3.06 a square foot.

In the central D.C. neighborhood, vacancy is 6.2 percent, while vacancy in the Columbia Heights-Shaw neighborhood is 2.7 percent and the vacancy rate for the city is 11.5 percent.

As a result of the relatively tight vacancy conditions, rents over the past year have increased 5.5 percent in central D.C. and 4.2 percent for Columbia Heights-Shaw. Since mid-year 2007, rents have increased an average of 4.3 percent per year in the central area, which compares favorably to the overall District average of 4 percent per year.

Currently, concessions make up 1.5 percent of face rents in central D.C., while concessions average 3.1 percent in Columbia Heights-Shaw. The average concession for all top-tier high-rises in the District is 2.3 percent. In the East End area, there are 1,321 units under construction and an additional 797 units planned to deliver over the next 36 months. Given the area’s strong performance, the additional units in the pipeline should be absorbed fairly quickly.

Since 2003, 1,599 new condominium units have opened in the area, and the pipeline is rather substantial. There is one new condominium project in the East End, The Grant, which began sales in 2006 and has sold 47 of its 63 units. Two additional projects with a total of 279 units are planned to begin sales by the end of the year within the neighborhood. There are a total of five planned projects with 543 units scheduled to open after 36 months, although some units may become rentals.

The East End has 44.9 million square feet of offices between 3rd and 15th streets NW and bounded by Constitution Avenue to the south and M Street NW to the north. About 3.3 million square feet is available to lease, which equates to a direct vacancy rate of 7.3 percent as of the second quarter of 2012. If sublet space is added, vacancy rate rises to 8.1 percent, about one percentage point lower than the rates in the District as a whole (8.1 percent and 9.2 percent, respectively).

Accounting for concessions, the average rent for high-end office space in downtown Washington slipped to $40.10-per-square-foot at mid-2012, down from $40.45-per-square-foot at the end of 2011. Rents declined 0.9 percent during the first half of 2012, after increasing 0.9 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.

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