In 2009 and 2010, the nation’s capital and its surrounding neighborhoods in Maryland and Virginia were the apartment business’ silver lining. Rents, buoyed by federal government-driven demand, stayed high. And, developers, unable to build in other parts of the country, began to break ground on projects in the District and close-in 'burbs.

Soon after, most of the country began to see rents pick up as new units kept coming online in the metro D.C. area. In 2013, 7,787 apartments arrived and, in 2014, another 10,538 units followed, according to Axiomterics. As that was happening, hiring in the government sector began to slow. And, suddenly, landlords in the area had issues. That continued into 2014.

“[The] Washington, D.C. Metro will be our weakest market again this year with a C rating and stable outlook,” said Camden’s President Keith Oden on its fourth quarter 2014 conference call. “Revenue growth was 0.9% in 2014, the lowest in our portfolio, and we expect that to be a recurring theme in 2015.”


Other REITs reported similar uncertainty. EQR saw 30 basis points of increased occupancy in the market (though that was the smallest improvement in the REITs’ portfolio).

“Despite another 13,000 units to be delivered this year and the tail end of 2014, deliveries in various stages of lease-up, the metro area remains very stable with solid occupancy and good pricing discipline,” said David Santee, EQR’s COO on its earnings call.


Home Properties gets 29% of its NOI from the DC area, which produced only 1.1% revenue growth. In its other markets, the REIT saw 4.4% growth.

“Our 2014 results were significantly impacted by the ongoing drag on earnings from our presence in D.C.,” CEO Ed Pettinella said on Home’s fourth quarter earnings call. “Our cash intrusion in our market often overshadows the good trends we are seeing in our other markets.”

Trouble Ahead?

Despite D.C. weighing it down, Home saw some positive momentum in the fourth quarter with its portfolio, made up largely of B assets, generating positive same-store revenue growth for the quarter of 1.2%. 

“From our perspective, D.C. hit bottom in the fourth quarter of 2013 and first quarter of 2014,” Pettinella said on the call. “Specifically new leases in D.C. hit a low of negative 4.3% in January 2014. However, by the fourth quarter and into January and February of 2015 right now, new leases were executed at negative 2%. We believe this upward trend will continue to improve as we move through 2015.”

Outside of REIT-land, some analysts think the Nation’s Capital has weathered the storm. “We think D.C. will still see soft growth in 2015, but late 2013 to mid-2014 might have been the bottom,” says Jay Denton, vice president of research at Axiometrics

Others agree. “For D.C., 2014 was the bottom,” says MPF Research Vice President Greg Willett. “While it still should be a national underperformer in 2015, results should top last year's numbers by a fairly big margin.”

But the feeling isn’t universal. With Axiometrics projecting more than 20,000 more units coming in 2015 and 2016, renters will have plenty of options. Ryan Severino, senior economist and associate director of research at Reis, thinks the new supply coming on the next few years spells continuing trouble in the market. 


“We definitely don’t think 2015 is the bottom,” he says. “There is so much new supply coming online this year and in the coming years I don’t see how that is remotely possible.”