Vacancies for multifamily properties in Suburban Maryland* have slightly decreased throughout the first three quarters of 2024. Vacancies have expanded during peak inflation for the past two years, impacting apartment renter demand. However, demand for apartments bounced back in 2024 due to a challenging homeownership market and increased household formation.
Multifamily Construction Remains Elevated, Starts Drop
Construction remains elevated here, with over 5,300 units currently underway. More than half of the units under construction are on the D.C. border in Bethesda, Silver Spring, and Hyattsville. Transit-oriented development continues to drive multifamily construction, with 85% of the units underway within 1-mile of a transit stop. While supply will remain a factor in the near term, construction starts are at 15-year lows due to the elevated interest rates, signaling that supply will likely fall off in 2026-2027.
Construction starts in Suburban Maryland have declined significantly, with just over 1,500 units getting underway. This level of starts is comparable to the Great Recession during 2008-2010. This downturn can be attributed to stringent lending conditions and elevated interest rates, which have impeded the progression of development proposals. Projects initiated during the pandemic’s period of low interest rates are now reaching completion, contributing to sustained high levels of apartment deliveries throughout 2024.
Overall sales volume has dropped significantly in the past two years due to a volatile economic environment. The Federal Reserve (Fed) focused on several rate increases to combat inflation and kept many investors (and their capital) sidelined. However, activity could increase over the next year as the Fed’s shift in policy could provide much-needed relief and open new opportunities for the multifamily real estate sector. And while the 10-year treasury rate has risen since the first rate cut in September, the Fed’s continued tightening and a new presidency could bring further transaction activity in 2025.
Cover image credit: Visit Montgomery
*Suburban Maryland contains the counties of Calvert, Charles, Montgomery, Prince George’s, and St Mary’s