The Baltimore metro multifamily market has remained steady in 2024, unlike some Sunbelt cities that have experienced sharp declines in rent growth. According to Harbor Stone Advisors, a locally based firm specializing in private client and middle market multifamily investment sales in the Mid-Atlantic region, there has been strong demand from renters despite elevated levels of new supply.
As a result of this robust demand, rent growth is accelerating and aligning with other Mid-Atlantic markets such as D.C., Richmond, and Norfolk. The outlook for the Baltimore market is positive with expected steady increases in asking rents through 2025 due to a slowdown in new deliveries.
We recently spoke with Justin Verner, president of Harbor Stone Advisors, about the current state of the local market and its future prospects. Here’s what he had to say:
Q: Have you seen an increase in construction activity for new apartments over the past few years? If so,
how has it affected pricing for both sale prices and existing rents?
A: Yes, there has been an increase in apartment construction lately due to low interest rates after COVID-19 hit. However,the pace of new projects has slowed down significantly since then – permitting is down by 60% compared to previous years’ averages. This means we can expect fewer deliveries between now until at least 2027 which will likely lead to higher rental rates as supply decreases.
Q: Despite this influx of supply,new data shows that renter demand remains high.What do you think is driving this trend?
A: We’ve seen vacancy rates drop by about 80 basis points since last year.This may seem surprising given all the new developments,but many attribute itto Baltimore’s stable economy driven by government jobs,”meds” (medical industry),and “eds” (universities). These industries provide consistent employment opportunities which attract renters looking for long-term stability.
Q: Your team at Harbor Stone Advisorshas completed numerous sales in the market recently. Are there any particular areas or types of properties that are attracting investors?
A: The past two years have been great for multifamily investment sales, but things started to slow down towards the end of 2022 when interest rates began to rise. However, we’ve seen a significant increase in activity since then as sellers adjust their expectations and buyers become more realistic about property values.
In terms of financing,we’ve noticed a decrease in buyers using agency financing due to rising interest rates. Instead, we’re seeing more life companies offering lower leverage loans (60-65% LTV) and an increase in bridge loans and debt assumptions.
Q: With the Fed lowering federal funds rate recently,doyou anticipate this will have an immediate impact on capital costs? Or is it something that has already been factored into current pricing?
A: In the long run,it’s likely that this will affect capital costs,but currently it hasn’t had much impact yet.It may take some time for traders to fully understand what’s happening before we see any significant changes.
For more information on Baltimore’s multifamily market visit ApartmentBuildings.com .
