While construction continues, the D.C. luxury rental market has crashed
By Jessica M. Goldstein,
Amanda Andrade-Rhoades For The Washington Post
Cranes still cut across the clouds above Washington. Stroll the Southwest Waterfront or swing by NoMa, and you’ll see that D.C. has not stopped building, not even during a pandemic. Near the end of March, Mayor Muriel Bowser deemed the construction and building trades essential — and so, even as much of the city shut down during the spring and summer, developers kept developing. But at the same time, covid-19 sent plenty of D.C. renters fleeing for places they’d long avoided (suburbia, their parents’ houses) and made potential newcomers wary of settling in the center of the city.
Anybody with even the flimsiest grasp on the concept of supply and demand could tell you what was coming: All over the city, a glut of rentals are sitting pretty and empty, their stainless-steel appliances gleaming for no one. D.C. luxury rentals, which make up about 89 percent of the city’s offerings, have taken a major hit, according to data from Delta Associates, a Mid-Atlantic commercial real estate research firm: From September 2019 to September 2020, the rate of stabilized vacancies — apartments that should be occupied but aren’t — went from 4.4 to 7.8 percent.
According to industry standards, “luxury,” or Class A, units are apartments that check these boxes: new construction (built within the past decade or so), new appliances, hardwood floors, in-unit washer-dryers, and typically some shared amenities such as rooftop pools and fitness centers. The offerings get bougier from there, such as “smart” thermostats and keyless-entry doors, but that’s the baseline. Class B is everything else: older buildings, even renovated ones, that still can’t shake that 1980s feel (e.g., kitchen counters made of lower-quality materials instead of quartz). Delta associate Moustafa Fahmy estimates the rent for a luxury studio in D.C. at $1,800 to $2,400 a month, with a one-bedroom going up to $2,600 or so and a three-bedroom around $3,200.
Those steep prices were easier to swallow in simpler times, like 2019. But what once made the happening, bustling neighborhoods in D.C. enticing is now, mid-pandemic, either moot or actively terrifying: proximity to bars, restaurants and nightlife (everything’s closed or full of people, who are full of germs); a short walk or Metro ride to the office (irrelevant as long as the office is your kitchen table); alive with the possibility of bumping into people in common spaces like a building’s pools, gyms and even elevators (just the thought of sharing an elevator right now … no).
“The suburbs and outer submarkets are thriving due to covid,” Brendan Pierce, a senior associate with Delta, told me. “The more dense the area, the worse that area is doing.”
Lately, the trend is as follows: Rentals aren’t moving and rents are falling. According to Delta, the three submarkets in which Class A rents have fallen the most during the pandemic are the area that includes Dupont Circle, downtown, Mount Vernon Triangle and a bit of Foggy Bottom and Logan Circle, which saw rents fall 12.7 percent since September 2019; Capitol Hill and the Southwest Riverfront, where rents dropped 12 percent; and upper Georgia Avenue, where rents are down by 11.7 percent. Overall, D.C. rents for high-rise luxury units decreased by 10.7 percent from September 2019 to September 2020.
Philippe Lanier is a principal at EastBanc, whose real estate development branch is behind a handful of luxury D.C. buildings, including the Westlight at 23rd and L streets NW; the Silva, which is still in development in Adams Morgan; and the Residences at Eastern Market, where, Lanier says, “we put in a lot of three-bedrooms” that they’re having trouble filling. (The building has over 20 three-bedroom units and almost as many with two bedrooms plus a den.) He says that other unit classes are 85 to 90 percent occupied, but the large apartments are “where we’re feeling the vacancies.”
Another important factor: 2020 has seen plenty of renters become first-time buyers. “Interest rates are at all-time historic lows,” says Long & Foster associate broker Terri Robinson, who has been selling in D.C. for 50 years. “People are moving out past the Beltway, and there’s still multiple offers. Montgomery County, Fairfax County. Some of the suburbs like Great Falls and Potomac that suffered in the past — those are coming back. People want more space, and they want a single-family home.”
Amanda Andrade-Rhoades
For The Washington Post
The exterior of the Residences at Eastern Market.
“We have a number of people who’ve left to buy a home and finally move out,” says Lanier. Meanwhile, would-be renters are wary of the commitment a lease requires. “When you think about moving in: Why am I moving into an apartment and signing a one-year lease? That’s a difficult decision,” Lanier says.
On the other end of the economic spectrum, record numbers of Americans have filed for unemployment since the pandemic began. People who are trying to get by on spotty government assistance — the $600 weekly unemployment benefit secured by the Cares Act in March expired at the end of July; at press time, future aid was still extremely TBD — aren’t in a position to move into a luxury condo, no matter what concessions are on the table.
That said, there are a lot of concessions on the table, should you be in a position to upgrade: In an effort to hit their occupancy goals, plenty of swanky buildings are lowering rent and, in some cases, offering a month free (basically a 13-month lease). Lanier says his properties are taking a more service-y approach: They’ll cover renters’ moving costs, and “we’re also offering additional packages that are dealing with furnishings,” assuming you’re upsizing and “may not have the furniture to outfit that apartment.”
“Rents are low,” Pierce allows. “Of course, you have a higher chance of catching covid. But a better chance to lock in a good price.”
Jessica M. Goldstein is a regular contributor to The Post’s Style section and the magazine.
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