Reston, Va.—The leasing agents at the Metropolitan at Reston Town Center don’t even have a model apartment to sell from. The first apartments at this 288-unit tower won’t open until December.

But tenants are already lining up for the only high-rise rental in Reston, and had leased about a dozen apartments in the first month the leasing office was open, according to KSI Services, Inc., the project’s developer. And that’s at rents averaging $2.37 per square foot, well above prices at other Virginia properties outside the D.C. Beltway.

“We’re a good 50 cents above the market,” said Karen Kossow, director of sales and marketing for KSI. It helps that the Metropolitan is the only thing on Reston’s rental market with granite countertops and stainless steel appliances.

But the building is also getting help from a very strong market for high-end apartments. The vacancy rate in Northern Virginia dropped below 4 percent in the second quarter, according to a survey of more than 100,000 apartments by Reis, Inc., a research firm based in New York City.

But vacancies are even lower at high-end apartment communities: Their vacancy rate in the middle of 2006 was just 1.4 percent, according to a survey of more than 80,000 of the area’s Class A and most-competitive Class B properties by Delta Associates, a research firm based in Alexandria, Va.

Thousands of these high-end properties have been taken off the rental market to be converted to condominiums since 2003. The tight market has allowed landlords to push their effective rents up by roughly 4 percent a year for the last two years, according to Reis.

Rent increases have been even higher for the high-end properties surveyed by Delta Associates: more than 6 percent in the last year alone.

Strong job growth has also helped drive the market for rental apartments, according to Grant Montgomery, vice president and a market analyst for Delta Associates.

Employers added 73,400 new jobs to the Washington, D.C., metro area in the 12-month period ending in April, according to information from the U.S. Census. More than half of those jobs were created in Virginia.

Montgomery said the kinds of jobs being created are particularly good for the rental housing business: contractors working short-term jobs and government office workers who often don’t have enough income to purchase a home.

“We have never had a larger gap between the cost of renting and the cost of purchasing,” said David Cohan, director of marketing for Southern Management Corp., which owns 25,000 apartments in the area. “The government job machine is not famous for paying six-figure incomes.”

The growing number of new units under construction is unlikely to overwhelm this apartment market, Montgomery said. Developers are likely to complete 4,319 new, market-rate apartments over the next three years, an average of nearly 1,500 a year, according to Delta Associates. That’s about average for this market over the last five years.

But the softening sales markets for condominiums could eventually hurt the rental market, as buildings that were converted to condominiums but failed to sell enough units reconvert back to rental apartments.

Delta counts more than 1,000 apartments in Northern Virginia that were meant to sell as condominiums but had those plans canceled in the second quarter. These units have probably already returned to the rental markets, and more are certainly coming.

Sales slowdown

Apartment investors bought fewer properties in Northern Virginia in the second quarter than at any time in the last two years as condominium converters stopped bidding on properties.

These apartment investors paid an average of $173,000 per unit for a total of $200 million worth of property, according to Real Capital Analytics, Inc., a research firm based in New York City. That’s a big difference from one year before, when optimistic investors paid an average $239,000 per unit for properties that sold for $390 million in total.

Over the 12 months ending in June, almost a quarter of the apartment properties bought in Northern Virginia were purchased by condominium converters.

Meanwhile, investors paid an average capitalization rate of 5.5 percent, with the lowest cap rates in submarkets like Alexandria, at 3.4 percent, and Fairfax, at 4.5 percent. A cap rate represents the net operating income of a property as a percentage of the sales price.