The multifamily market in the Washington, D.C., metro area has experienced meaningful shifts in 2024, marked by moderate demand, consistent construction and evolving investment patterns. As a major urban hub, D.C. continues to attract both local and out-of-state investors eager to tap into its growing potential.
Out-of-state capital
A key trend in the D.C. multifamily market is the strong influx of out-of-state capital. This year, 44 percent of buyers in our DMV (D.C., Maryland and Virginia) listings came from outside the region, drawn by the area’s stability and long-term growth potential. These out-of-market investors often pay a premium over local buyers, keeping deal volume and pricing competitive even amid rising interest rates. This steady inflow of external capital has reinforced the market’s resilience, underscoring the perceived value of D.C. multifamily assets.
The demand from out-of-state investors has also provided stability to the market, helping to sustain price levels and liquidity despite macroeconomic headwinds. By bolstering interest in multifamily properties, this capital flow supports continued growth and positions D.C. as a desirable destination for long-term investment.
As this trend persists, the D.C. metro area is likely to remain a focal point for diverse capital sources, ensuring strength and adaptability in its multifamily sector.
Submarket trends
Vacancy and rent trends vary across the metro area’s submarkets. Northern Virginia leads in rent growth, with its vacancy rate dropping to 4.4 percent mid-year from 4.8 percent in 2023. Effective rents have increased by about $100 since January, reflecting a year-over-year growth of 5.9 percent — a strong draw for renters seeking proximity to D.C. at lower rents.
D.C. proper, meanwhile, saw a moderate vacancy increase to 5.6 percent, largely due to over 7,000 new units added through recent construction. Maryland suburbs remain stable at a 5.5 percent vacancy rate, offering a more affordable alternative for renters prioritizing cost and access to amenities.
Sales stabilize
The multifamily sales market in D.C. has shown resilience in 2024. In the first half of the year, there were 35 multifamily transactions ranging from $1 million to $50 million in the District, with an average deal size of $5.5 million — a decrease from 2019’s higher transaction count and $7.5 million average.
This lower average deal size suggests a focus on smaller or more competitively priced properties as investors navigate the current interest rate environment. Looking forward, anticipated rate cuts in 2025 could boost transaction volume, with strong out-of-market interest expected to keep deal activity lively.
Looking ahead
As we head into 2025, the D.C. metro multifamily market appears well-positioned for continued strength, driven by job growth, stable vacancy and solid rent trends. Northern Virginia is expected to remain in high demand due to consistent rent increases and a robust job market.
For investors, D.C. remains an attractive option. Steady rent growth and moderating cap rates make the region appealing, especially as out-of-market capital flows in. With D.C.’s role as a central employment hub, multifamily demand should stay high, offering ample opportunity for growth — particularly in new, amenity-rich developments that meet evolving tenant needs.
— By Brian Hosey, senior vice president, division manager, Marcus & Millichap. This article was originally published in the November 2024 issue of Southeast Real Estate Business.