Multifamily development in Alexandria is in high gear, according to Mark Teather, vice president and director of apartment practice at Delta Associates. "The basic fundamentals necessary for growth are all here," he says. "We have a strong economy, rent growth, low vacancy and a reasonable supply pipeline."

The majority of development is taking place in southern Alexandria between 236/Duke Street and Interstate 495/Interstate 395 because first tier sites are scarce. "Developers recognize a rental premium associated with metro access, and therefore they are doing their best to locate on or close to them," Teather says.

Because of area tenants' desires to live in metro areas, higher-density product is hot, according to Teather. There are a large number of new high-rise and mid-rise developments and some high-density, garden-style apartments with more than three floors. These new projects are being marketed toward renters by choice, single professionals, empty nesters, couples and roommates who want double master floor plans.

Average rental rates in Alexandria range from $1,279 for garden-style apartments to $1,333 for Class A high-rise apartments. This represents a 16.4 percent and 16.5 percent rent growth, respectively, over the past 12 months. "During the past year, Alexandria's strong economy and supply-constrained market has led to these rate spikes," says Teather.

Vacancy rates for high-rise, Class A product are extremely low at 0.5 percent, and garden Class A are at 1 percent. The Washington Metro Area's average for all classes is 0.8 percent, the lowest rate since World War II, according to Teather. "Few offerings and extremely low vacancy have kept the absorption of product suppressed. Northern Virginia's overall supply-constrained condition has consumers moving toward the location of supply," he says.

Because of the strength of the northern Virginia/Washington, D.C., market, many developers across the nation have come to look at opportunities in the area over the past couple of years. It has been difficult to solidify a deal for any developer, though, according to Teather. All projects in the 36-month pipeline are being led by developers who have experience building elsewhere in the Washington Metro area.

Trends in Alexandria's multifamily development market are moving toward catering to renters by choice by offering tenants more service-oriented perks, open floor plans, covered parking and more two-bedroom, two-bath units and project amenities in general. Other trends are toward the repositioning and redevelopment of older and under-performing Class B and C properties. "The large gap in rent makes the potential upside attractive," says Teather.

Submarkets to keep an eye on in the future are Carlyle/Eisenhower Valley and Van Dorn, as well as the Metro and I-495/Woodrow Wilson Bridge access area. Another significant event to make note of is the approval for the Patent and Trademark Office to relocate to Carlyle from Crystal City. The PTO will consume five new buildings and 2.4 million square feet of office space.

Teather also points out that there are 3,520 market rate apartments under construction or planned in the next 36 months, representing 22 percent of the total Virginia market rate pipeline. An additional 1,740 market rate apartment units are rumored to be built in the longer term in Alexandria. "This product will out-strip demand over the next 36 months, considering the economy is constant. Vacancy rates will rise to the 3 to 5 percent range, and rent growth should level off to more historical averages, at about 4 to 6 percent," he says.

Mark Teather is vice president and director of apartment practice with Delta Associates.


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