Washington, D.C.

Down 7 Places

2012 Rank: 9

2011 Rank: 2

Employment Trends
Total Nonfarm Jobs (thousands) Absolute Change Y-O-Y % Change

50 25 0 -25 -50

4%
Year-over-Year Change

2% 0% -2% -4%

L

Strong Interest in the District Persists While Institutions Comb Suburbs for Large Assets

08

09

10

11*

12**

Supply and Demand
8
Units (thousands) Completions Vacancy

7% 6%
Vacancy Rate

ess construction and steeper declines in vacancy will rank other markets ahead of the Washington, D.C., metro this year, but strong tenant demand and rent growth will support another year of positive marketwide performance. Renter demand will grow faster than apartment stock in 2012, as job creation and a large population of recent college graduates form new households. In addition, tighter residential mortgage requirements will compel many residents to delay home purchases, leaving rentals as the only realistic housing option in desirable areas. Demand growth will be widespread, and vacancy will decline in each section of the market. Even in Virginia, where nearly 2,500 units will come online this year, vacancy will fall to the mid-3-percent range. Metrowide completions will rise in 2012, but the eventual unit count may be lower than anticipated as construction lenders become more selective. While access to construction funding may prove problematic this year, attractive acquisition financing will sustain a liquid investment market. Activity is especially strong in the district, where resident demand for rental housing remains somewhat unfulfilled. Top Class A product here continues to command cap rates of around 5 percent, while performing Class B properties trade at approximately 6 percent. Complexes in the northwest district will be primary investment targets and sell at the lowest cap rates, while assets without close Metro access might require cap rates of approximately 8 percent. Properties in Maryland near public transportation command keen interest, but investors remain hesitant to consider assets in areas with high unemployment. Institutions remain active in Virginia, where operating conditions will benefit from BRACmandated workforce relocations. 2012 Market Outlook

6 4 2 0

5% 4% 3%

08

09

10

11*

12**

Rent Trends
Asking Rents Year-over-Year Change Effective Rents

6% 3% 0% -3% -6%

2012 NAI Rank: 9, Down 7 Places. A lackluster job market dragged Washington, D.C., seven spots lower in this year’s ranking. Employment Forecast: In 2012, total employment in the metro will increase 1.5 percent, or by 44,000 jobs. About 18,000 positions were added last year. Construction Forecast: Developers will increase rental stock 1.2 percent this year, or by 4,700 units, including 1,400 rentals in the district. Vacancy Forecast: Robust job growth will spur tenant demand and drive down metrowide vacancy 40 basis points this year to 4 percent. A 70-basispoint drop was recorded last year. Rent Forecast: Average asking rents in the metro will advance 4.1 percent in 2012 to $1,478 per month. Concessions will wane as effective rents increase 4.8 percent this year to $1,422 per month. Investment Forecast: Most properties near public transportation will command attention. Emerging neighborhoods, however, in the southeast district near the new headquarters for the Department of Homeland Security will spark interest.
Vacancy: 40 bps t Effective Rents: 4.8% s

08

09

10

11*

12**

Median Price per Unit (thousands)

Sales Trends
$120 $105 $90 $75 $60

07

08

09

10

11*

* Estimate

** Forecast

Sources: Marcus & Millichap Research Services, CoStar Group, Inc., RCA

Market Forecast
page 54

Employment: 1.5% s

Construction: 2,270 s

2012 BLACK TEXT VERSION Annual Report