Steady Apartment Supply Allows Strong Fundamentals in DC

Washington, DC has reported some of the nation's most stable apartment fundamentals throughout the supply-induced rent fluctuations of the last couple years. One key reason why the market has maintained near-normal rent and revenue growth is its remarkably steady construction pipeline.

Unlike many markets nationwide, Washington, DC has posted little fluctuation in its delivery load over the last few years, with an average of about 12,800 new units delivered annually over the past five years, coming within a tight range of roughly 11,000 units to 14,700 units per year during that period. In 2024, a total of 14,187 new units came online in the market, according to data from RealPage Market Analytics. Completions were geographically distributed, with six of DC’s 36 submarkets receiving roughly 1,000 to 1,500 units last year. Bethesda/Chevy Chase and Crystal City/Pentagon City had faster ramp ups in completions of around 7.5%, but fundamentals in those two submarkets remained strong in February.

While supply has been relatively steady over the past five years, demand has not. Demand dropped during the onset of the pandemic and then peaked in early 2022, only to fall again in late 2022 and early 2023. However, over the past year, demand has picked back up. In 2024, DC recorded the sixth-strongest demand showing nationwide, absorbing over 21,900 units and surpassing concurrent new supply by more than 7,700 units. That level was the most seen nationwide.

With demand improving, occupancy in Washington, DC rose 140 basis points (bps) year-over-year to 96% in February 2025, landing 40 points above DC’s pre-pandemic level from February 2020. In addition, DC’s recent occupancy rate was 100 bps above the national norm of 95% and has remained above the U.S. average for nearly two years.

Across the price spectrum, Class B units in DC continued to claim the strongest occupancy (96.2%), while occupancy in both Class A (95.8%) and Class C (95.9%) units slightly trailed the market average. Among submarkets, occupancy ranged from a top reading in Columbia Pike of 97.7% to a bottom showing in Wheaton/Aspen Hill of 93.3%. Still, 30 submarkets posted rates above the effectively full mark of 95%.

With demand picking up and occupancy remaining at or above the essentially full mark for eight months, operators have pushed rents recently. In the year-ending February 2025, effective asking rents were up 3.2%, well above the national average of just 0.8% and ranking among the top 10 increases among large markets nationwide. In addition, rent growth in DC has outpaced the national norm for nearly two years.

Class A and B assets have seen the lion’s share of DC’s rent growth recently. Class A assets took the lead with annual rent growth in February of 4.5%, followed by Class B at 3.8%. Class C trailed with rents up 1.2% year-over-year. Geographically, all but four of DC’s 36 submarkets managed some rent growth in the last year, led by the strongest upturns of more than 7% in Seven Corners/Baileys Crossroads/Annandale (7.5%) and Woodbridge/Dale City (7.2%). Conversely, rents were cut 6% year-over-year in East Silver Spring/Takoma Park/Adelphi, despite no new supply in 2024 and occupancy remaining above the essentially full mark for nearly 15 years.

Stability in Washington, DC’s apartment market has been partially attributable to an economic anchor in federal government. With the nation’s capital in Washington, DC, the area is heavy on Government sector employment, which comprise 21% of all jobs in the metro area, well above the national average of 15%. DC’s Federal Government sector comprises more than half of all the market’s Government jobs, with roughly 375,000 people employed in that sector as of December 2024, or about one out of every 10 workers. However, the impacts of terminating federal workers by Elon Musk’s Department of Government Efficiency (DOGE) as well as return-to-office mandates have yet to be fully understood.

With nearly 700,000 existing units, the Washington, DC apartment market borders Baltimore to the northeast and Richmond to the south. The DC market encompasses the District of Columbia and spills over into parts of Virginia, Maryland and West Virginia. In addition to government workers, the area also has a large science and engineering workforce. Jobs in Professional and Business Services comprise 24% of the DC workforce and only 14% nationally. Additionally, the Washington, DC area is home to 19 Fortune 500 company headquarters, ranking #6 nationally, the largest companies (in terms of revenue) being Fannie Mae, Freddie Mac, Boeing, RTX, Lockheed Martin, Capital One Financial, General Dynamics and Northrop Grumman.

Job growth across DC, which had been strong throughout the pandemic recovery period, has leveled off to stand in line with the national norm. In 2024, Washington, DC added 38,900 jobs. Those additions expanded the employment base 1.1%, in line with the U.S. average of 1.3%. As of December 2024, Washington, DC had 78,000 more jobs than the market had in February 2020, before the COVID-19 pandemic downturn. That growth translated to a rate of 2.3%, below the U.S. average of 5.9%. Still, unemployment in Washington, DC has been comparatively low. In December, the unemployment rate in the nation’s capital registered at 2.8%, the sixth-lowest rate among the 50 largest U.S. markets.

With slow but steady job growth, the population in the Washington, DC metro area has been increasing at a modest clip. From 2020 to 2023, the area grew 0.7%, slightly below the U.S. average population increase of 1%. As of 2023, the DC area had over 6.3 million residents, making it the sixth-largest metropolitan area in the nation, based on the latest estimates from the U.S. Census Bureau. Furthermore, the greater Washington, DC area has one of the most educated and affluent populations in the U.S. More than half (53.1%) of the 25-year and older population have at least a bachelor’s degree, compared to the national average of around 34%. In addition, median household income in DC registers around $122,000, nearly 63% higher than the national norm ($75,149).