Despite some dire warnings early in the pandemic, the multifamily rental sector in Virginia has performed relatively well over the past year, with stable vacancy rates and steady or rising rents in most markets across the state. The one exception was the Class A market in Northern Virginia, which softened a bit during the downturn. However, rental demand is poised to be epic in Virginia in 2021. New construction has picked up, which will help ease the tight market conditions, but the pace of deliveries of new apartment units is well below what will be needed to meet demand.
Virginia REALTORS® Q2 2021 Multifamily Market Report provides data and analysis on multifamily rental buildings with 50 or more units for nine metropolitan areas in Virginia. In addition to tracking rents, vacancy, absorption, and new construction, the quarterly report offers a look ahead to what we can expect in the multifamily market in 2021.
Key Trends in Virginia’s Multifamily Real Estate Market
- A Return to Renting. People are heading back to the multifamily rental market, leading to declining vacancy rates and rising rents. Average multifamily rents posted strong gains in the first half of 2021. Last year, as mortgage rates hit historic lows, the demand for homeownership surged. However, as home prices soared and inventory shrank, some would-be homebuyers are turning back to the rental market. Some are taking a “wait and see” approach in homeownership, but others may be longer-term renters. Either way, demand for rental housing will be strong in 2021.
- Cities are Back, although they never really went anywhere. Demand for multifamily rental housing in Virginia’s urban areas was strong in the second quarter of 2021. While there was robust rent growth throughout Virginia’s metropolitan areas, rents rose fastest in Class A buildings in Northern Virginia submarkets. This rent growth suggests that COVID-19 may not have altered the draw of close-in rental markets. Many renters are still looking to live where the action is.
- Suburbs Offer New Rental Opportunities. Renters are looking to cities, but they are also flocking to the suburbs. New construction of multifamily buildings in Virginia increased in the first half of 2021 after slowing somewhat in 2020. While Northern Virginia accounts for about half of new construction in 2021, there has been a shift over the past 12 months to relatively more new construction in the suburbs and in the state’s mid-sized metro areas. Multifamily apartment buildings in these markets are increasingly competing with the hot, single-family rental market, where investors have a growing presence in some local communities.
Check out our Q2 2021 Multifamily Market Report for recent trends in Virginia’s multifamily rental market, including detailed market statistics for nine metropolitan areas across the state and an outlook for 2021.