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DC Metro

Second Quarter

2014
Multifamily Snapshot
www.cassidyturley.com
Economic Indicators
DC METRO MULTIFAMILY
Market Tracker
*Arrows = Current Qtr Trend
The Washington DC metropolitan area multifamily market showed no signs of slowing down during the
second quarter of 2014. The region is in the midst of a wave of new multifamily construction, evidenced
by the 2,951 units completed in the second quarter. This brings the 2014 year-to-date total to 6,516
completions, already surpassing the 5,818 units completed in 2013. While there has been much
concern about overbuilding, the Washington DC metro has continued to post very strong absorption
totals quarter after quarter. The region absorbed a healthy 2,560 units in the second quarter, bringing
the 2014 year-to-date total to 4,904 units. This means the region is on pace to surpass its all-time record
of 9,373 units absorbed in 2010.
Northern Virginia led the region in both absorption and completions. It delivered 1,344 units and
absorbed 983 units, with strong absorption gures registered in Rosslyn/Ballston (210 units), Tysons
Corner/Fairfax City (237 units) and Western Fairfax County (208 units). As was the case in the rst
quarter of the year, submarkets with the strongest absorption totals were those with new completions,
and the three submarkets noted above delivered a combined total of nearly 1,000 units in the second
quarter alone. Suburban Maryland also posted strong numbers, with 689 units completed and 950
units absorbed during the second quarter of 2014. All of the newly delivered units in Surburban Maryland
were in Northern Prince Georges County and thus it had the strongest absorption total at 541 units. The
District of Columbia, not to be outdone by its neighboring jurisdictions, delivered 918 units and absorbed
627 units. Similar to the case in Suburban Maryland, the only submarket to deliver new units - Anacostia/
Northeast DC- had the highest absorption total at 486 units.
Only one of the regions 26 submarkets posted very modest negative absorption during the second
quarter, an extremely positive sign for the continued health of the region. Foggy Bottom, heavily
populated by college students, posted a negative 22 units, likely the result of students moving out of the
area as the school year ended. Vacancy in the Washington DC Metro ticked up slightly for a third straight
quarter, registering 4.3% in the second quarter. Vacancy rates in Northern Virginia and the District of
Columbia also ticked up moderately, registering 4.2% and 5.7%, respectively. However, the vacancy
rate in Suburban Maryland declined 0.2 percentage points to 3.6%. The small increases in vacancy are
largely a result of the abnormally high number of new units coming online and so should not be a
signicant concern as the majority of these new units are still in the lease-up stage.
Asking rental rates for the region averaged $1,542 in the second quarter, a 1.6% increase from year-end
2013. With the exception of a slight dip in the fourth quarter of 2013, rents have been increasing steadily
for the past four years at an average rate of 0.7% per quarter. Class A properties, with asking rents
currently averaging $1,818 per unit, yield a signicant premium over Class B/C properties which average
only $1,287 per unit. With so much new product coming online, the region has seen a continued ight
to quality, with absorption in Class A units far outpacing that of Class B/C units. Many owners are staying
on top of this trend by completing renovations on older units in an effort to stay competitive.
Multifamily investment sales activity registered $1.5 billion through the rst half of 2014. While this
means 2014 will not nearly reach the record set in 2013 (when the Archstone Portfolio sale contributed
to a staggering $8.0 billion in sales volume), it is still on pace to match sales volume in 2011 and 2012.
The District of Columbia led the region through the rst half of the year with $596.5 million in sales
volume and was also home to a record-setting sales transaction. The Woodley, at 2700 Woodley Road,
NW, traded from a joint venture among CIM Group and The JBG Companies to TIAA-CREF for $195
million, or a staggering $919,811 per unit. Northern Virginia has had $385.6 million in sales volume
through the rst half of the year, while Suburban Maryland has had mostly Class B/C product trade and
has registered $480.4 million.
Outlook
While there is certainly an unprecedented number of new units under construction or recently
delivered, economic and demographic fundamentals in the Washington DC region make a strong
case that there will be continued demand for new product. It is likely that the supply bubble is
nothing more than a short-term blip in a region that is actually under-supplied long-term.
Although Class A and Class B/C asking rents have been tracking pretty closely for the past several
years, the huge amount of new construction and higher demand levels for top-quality space will
likely cause Class B/C rents to atten out and decline slightly as more and more Class A space is
delivered. Meanwhile, Class A rents are expected to continue their steady increase, as long as
absorption levels stay strong.
Market Overview
Absorption, Completions & Vacancy
2Q 2014 2Q 2013
Employment 3.087 M 3.078 M
Unemployment Rate 5.0% 5.5%
Population 5.945 M 5.894 M
MF Permits Issued 2,192 3,312
MF Starts 2,296 2,087
Average Home Sale Price $678 K $639 K
Average Days On Market 30 32
Average Rate (30 Year FRM) 4.14% 4.46%
10 Year Treasury Yield 2.53% 2.52%
Asking Rents
Source: Cassidy Turley, REIS
Source: Cassidy Turley, REIS
Net Absorption
2,560 Units
Completions
2,951 Units
0%
1%
2%
3%
4%
5%
6%
7%
0
2,000
4,000
6,000
8,000
10,000
2008 2009 2010 2011 2012 2013 YTD
2014
V
a
c
a
n
c
y

R
a
t
e
U
n
i
t
s

(
T
h
o
u
s
a
n
d
s
)
New Deliveries Net Absorption Vacancy Rate
$1,200
$1,250
$1,300
$1,350
$1,400
$1,450
$1,500
$1,550
$1,600
$1,650
2008 2009 2010 2011 2012 2013 Q2 2014
P
e
r

U
n
i
t
DC NoVA Suburban MD
Vacancy
4.3%
Asking Rent
$1,542
Source: BLS, U.S. Census Bureau, Moodys Analytics, MRIS,
Freddie Mac, U.S. Department of the Treasury
www.cassidyturley.com
Bethany Schneider
Research Analyst


2101 L Street, NW
Suite 700
Washington, DC 20037
Tel: 202.463.2100
Fax: 202.223.2989
Bethany.Schneider@cassidyturley.com
The information contained within this report is
gathered from multiple sources considered to be
reliable. The information may contain errors or
omissions and is presented without any warranty
or representations as to its accuracy.
Copyright 2014 Cassidy Turley.
All rights reserved.
About Cassidy Turley
Cassidy Turley is a leading commercial real estate services provider with more than 4,000 professionals in more than 60 ofces nationwide. With
headquarters in Washington, DC, the company represents a wide range of clientsfrom small businesses to Fortune 500 companies, from local
non-prots to major institutions. The rm completed transactions valued at $25.8 billion in 2013, manages approximately 400 million square feet
on behalf of institutional, corporate and private clients and supports more than 24,000 domestic corporate services locations. Cassidy Turley serves
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Absorption and Asking Rents by Class
DC Metro
Multifamily Transaction Voume and $/Unit
DC Metro
Apartment Absorption
DC Metro
Historical Completions by Market
DC Metro
$0
$500
$1,000
$1,500
$2,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
2007 2008 2009 2010 2011 2012 2013 YTD
2014
A
v
e
r
a
g
e

A
s
k
i
n
g

R
e
n
t
U
n
i
t
s
Class A Absorption Class B/C Absorption
Class A Average Asking Rent Class B/C Average Asking Rent
$4.42
$2.15
$1.45
$0.39
$0.60
$0.48
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
Northern Virginia District of Columbia Suburban Maryland
B
i
l
l
i
o
n
s
2013 2014 YTD $/Unit
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
YTD
U
n
i
t
s
0
2,000
4,000
6,000
8,000
10,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD
2014
U
n
i
t
s
Northern Virginia Suburban Maryland District of Columbia
A clear ight-to-quality trend has emerged, forcing many owners to consider
renovating Class B/C properties. Despite tenants strong afnity for Class A
space, Class B/C rents have held up. Expect to see a slight divergence in
Class A and Class B/C rents as the ight to quality trend continues.
Record-breaking multifamily sales volume in 2013 was largely due to the
disposition of the Archstone portfolio in Northern Virginia. While sales
volume has been more subdued through the rst half of 2014, it is still on
pace to reach transaction volume achieved in 2011 and 2012.
Despite a record number of deliveries, absorption is on pace to surpass its
all-time high reached in 2010.
Half way through 2014, Suburban Maryland has already surpassed its 10-
year completion high while Northern Virginia and the District of Columbia
are on pace to do so.
Key Sales Transactions 2Q 2014
PROPERTY UNITS SELLER/BUYER PRICE PRICE/UNIT
The Woodley- 2700 Woodley Road, NW, Washington, DC 212 CIM Group JV The JBG Companies / TIAA-CREF $195,000,000 $919,811
The Louis at 14th- 1916-1934 14th Street, NW, Washington, DC 268 The JBG Companies / TIAA-CREF $176,500,000 $658,582
South Cathedral Mansions- 2900 Connecticut Avenue, NW, Washington, DC 132
William Calomiris/ Oculus Realty JV CAS Riegler Companies JV
Commonwealth Residential
$70,000,000 $530,303
Windsor Towers- 5539 Columbia Pike, Arlington, VA 280 Carmel Partners / AHC $58,100,000 $207,500
3409 Wilson Boulevard, Arlington, VA 85
Korman Communitites JV Hunt Properties / Goldstar Group JV Finmarc
Management
$39,880,000 $469,176
The Policy- 1921 Kalorama Road, NW, Washington, DC 62 Urban Investment Partners / Goldman Sachs $19,800,000 $319,355
Source: REIS Source: REIS
Source: REIS, Cassidy Turley Source: Cassidy Turley

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