Apartment builders are pouring money into the Washington area real estate market, buying land and existing buildings in an effort to take advantage of a relatively stable job market and a region that they say has become more attractive to young professionals.
Delta Associates, a research and consulting firm based in Alexandria, called the Washington area “the best performing apartment market in the nation” at the end of June, due to the available jobs, a vacancy rate of only 3.1 percent and a long pause in building that began with the financial crisis.
Those conditions have prompted buying sprees of sites where new units can be constructed and of aging buildings that can be upgraded. In the District, 1,221 units are expected to be completed in the 12 months ending next June, an increase of 47 percent from last year, according to Delta. In Northern Virginia, the increase is 16 percent.
Urban Investment Partners, a private apartment builder and manager based in the District, is in the midst of a string of acquisitions of buildings in the Northwest D.C. neighborhoods of Adams Morgan, Columbia Heights and others, including the $12.4 million purchase of three apartment properties out of foreclosure in June.
“I think that D.C. has become a much more cosmopolitan city, where people I think come here and stay here,” said Steve Schwat, UIP principal. “Whereas when I came here in the 1980s people used to come and go, and people referred to D.C. as a very transient place.”
“It has a desirability above and beyond ‘Oh, I just went there to get a political job,’ ” Schwat added.
Equity Residential, the Chicago-based apartment builder and operator that is a member of the S&P 500, has also been aggressively acquiring development sites and existing buildings in Washington.
Equity is constructing 188 units in Arlington and plans to start building another 360 in Alexandria in November. In the District, the company recently acquired a property made up of a warehouse and two rowhouses at 455 I Street NW, where it plans another 162 units.
The prospect of cuts to the federal government’s budget has not weakened Equity’s appetite. Greg White, a vice president for development at Equity, said the Washington area still “has the steady employment that frankly no other region in the country probably has, and despite discussion about the downturn or the cutbacks in federal spending in the government, it just continues to produce jobs here year in and year out.”
White said a turn away from home ownership boosted interest. The newest generation of renters are in their 20s and 30s, and they are putting a premium on location.
“They’re more interested in where they live, in renting, as opposed to owning and living somewhere in the outlying suburbs. It’s really made the whole rental business that much more attractive,” he said.
The race to build apartments is also spreading into areas that have not seen major residential investment. The Georgelas Group and Greystar plan a 25-story apartment tower in Tysons Corner — an area where only 19,000 people live. In the District, developers have announced plans for new apartments on South Capitol Street in Southwest and on Good Hope Road in Southeast.