WASHINGTON, DC - This article will look at current trends in real estate in Washington, DC. We'll see that rents are outpacing home value appreciation, Downtown condo sales are on the rise, and the Office and Retail property sectors are recovering.
Rents Are Outpacing Home Value Appreciation
While Washington, DC, is still one of the best places to invest in real estate, there is a shift in the real estate investing community. Many investors are turning to rental properties rather than flipping houses. This is partly due to the relatively low-interest rates, which can offset higher acquisition costs and help increase monthly cash flow.
Although the Washington, DC, housing market has been slow to rebound in recent years, it is still a viable market that serves the needs of households across the income spectrum. The median price of a home in the market today is $708,135.
Downtown Condo Sales Are On The Rise
The government sector in the District and a large number of biotech companies in the suburbs are driving growth in the area. Moreover, Amazon HQ2 is under construction and should help the local economy. However, the current infrastructure is not yet fully developed and needs to be redeveloped.
However, there are also other factors that are slowing down downtown D.C. Real estate. A number of companies are adopting hybrid and remote work policies. This suggests that banking on pre-pandemic office levels may not be as reliable as it used to be. As a result, some leaders in the city are trying to attract new businesses, schools, and people to the area. By doing so, they hope to make downtown a live, work, play destination.
The Retail Property Sector Is Recovering
The retail property sector in Washington, DC, is slowly recovering from the decline seen in the early part of this decade. While the market in downtown D.C. is struggling with decreased foot traffic, mixed-use areas are recovering faster. This is partly because mixed-use areas have a higher concentration of residential tenants. The first quarter of 2021 saw an increase in absorption in the mixed-use submarket. Despite this, office-heavy submarkets again accounted for the negative absorption rate for the quarter.
The multi-family market in DC is expected to continue its recovery. However, hotel valuations are likely to remain volatile during the recovery. There are many factors affecting the overall market. Supply chain shortages and rising construction costs will continue to affect the market. Rising interest rates and increasing labor shortages are also expected to impact the market. In addition, the mayor's office has prioritized the support of sagging sectors and increased housing affordability.
Office Sector Is Recovering
The office sector is recovering in the District, albeit slowly. Its availability rate is at an all-time high, 15 percent, according to Colliers International. That figure doesn't include employees who do not show up for work. The city is also celebrating the one-year anniversary of COVID next month. Most of the offices in Manhattan sit vacant for most of the day. And because the rollout of COVID is still on a shaky footing, it's likely to remain this way for a while.
The office sector in Washington, DC, has been suffering in recent years from a decline in demand and a spike in vacancy, which is tilting the dynamics against landlords. Despite this, experts see signs of recovery. New Q1 reports show that office absorption declined slightly in the D.C. metropolitan area, and mixed-use submarkets began to recover.
Office Occupancy Rates Are Nearing Pre-pandemic Levels
The office market has shown signs of stabilization recently, with leasing and construction activity stable in the First District. However, when the outlook for the future deteriorated, leasing activity declined significantly. With more clarity in the market, office tenants have approached their leasing decisions with more confidence. While the changes in office space requirements varied by neighborhood, overall occupancy rates have been below pre-pandemic levels in the downtown areas.
Long-term Rental Properties Are Becoming More Popular
As the Millennials' population grows, the rental market is set to see a continued upward trend. The third quarter of 2019 saw a growth in the dollar volume of multifamily transactions by 9%. The Harvard report on the rental market includes a range of statistics but not Covid-19 era data. Despite the positive trend, the rising demand for housing will not prevent prices from rising.
Rents in Washington DC have increased by 1.1% in the past month and 5.7% over the same period last year. The median rent in DC now stands at $1,838 for a one-bedroom apartment and $1,816 for a two-bedroom apartment. However, the growth rate lags the national average of 10.0%.
