Class B Market Remains Strong in Spite of New Properties Being Delivered
Although new Class A apartment deliveries have been high lately, Class B properties continue to see an increase in effective rent as well as a decrease in vacancy throughout the Washington metro area. Effective rent among all classes of apartments grew by 1.4%, while vacancy decreased from 2.8% to 2.3% between September 2015 and September 2016. These changes are partially a result of strong absorption trends in the Class B market. Many renters prioritize affordability, and a major contributing factor to this is booming job growth, particularly in the lower-wage sectors.
Within the next year or so, however, we expect Class B rents to simmer down. This is because the increasing amount of new apartment deliveries will cause Class A rents to decline due to increased competition. Consequently, the Class B market would be effected as rents would need to be distinguishable among the two asset classes.