Manassas/Gainesville Multi-Family Submarket Q1 2019

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The Manassas/Gainesville Submarket is in suburban Prince William County and has a commuter-heavy population, and while it lacks Metro access it does have the Virginia Rail Express and is traversed by major highways. The area saw an uptick in development from 2013–16, with nearly 1,300 units added, and even more is expected. Despite the influx of supply, lease-ups have been steady and solid, if not outsized, and above average rent growth has added to the submarket’s development appeal. Sales are sporadic, and it’s common for years to go by with just one or two sales, but institutional money is not afraid to target this area when a building becomes available.

Manassas/Gainesville is experiencing an economic upswing that bodes well for apartment demand. Absorption has been robust for the past five years, and despite erratic moves due to new supply, vacancy recovers quickly. Many jobs in the Manassas/Gainesville Submarket are low- to mid-income blue-collar positions, resulting in consistent demand for 1 & 2 and 3 Star apartments. For example, Micron Technologies, a large manufacturer of memory and storage technologies, has its East Coast manufacturing headquarters in Manassas. Military personnel who operate out of Fort Belvoir and Quantico also make up a sizable portion of the submarket’s renter pool. Further contributing to apartment demand is a large student-renter concentration at Northern Virginia Community College’s Manassas campus. These campuses are in an area that Prince William County has dubbed Innovation Park, which will be redeveloped as a university-oriented corporate research park with a mixed-use town center. While still in planning, the project could eventually create 8,000 jobs.

At about $1,450/month, average asking rents in Manassas/Gainesville are about 15% lower than average rents at the metro level ($1,700). With fundamentals on solid footing, rent growth this year is solid. As of Q4 2018, year-over-year growth was almost 4% higher than the average for the Washington, D.C. metro. Much of the appeal of Manassas/Gainesville comes from its affordability. Average 4 & 5 Star rents are about $1,600, a 25% discount from the metro average. Due to affordability and more manageable levels of construction, concessions are negligible compared with those in inner ring suburban submarkets or the urban core.

Construction activity has moderated since the busy period from 2013–16. Given the submarket’s solid fundamentals, encouraging lease-ups, and the strong uptick in migration of 25–34-year-olds to second-ring suburban areas, additional groundbreakings would not be a surprise. No projects delivered in 2017, but two more projects delivered earlier this year and more were under construction. According to Manassas’s economic development information, most of the undeveloped land in the area is fragmented into small parcels that would hinder larger multifamily development, hence most recent projects delivered fewer than 100 units.

Sales occur sporadically in Manassas/Gainesville, evidenced by wavering volume since 2011. As of Q4 2018, more than $100 million in transactions had been recorded, putting the submarket on pace for another record year. A portion of the volume came from the sale of the 190-unit Amberton apartments in Manassas. The asset traded as part of a seven-building portfolio that sold for $358 million. The other transaction was Aksoylu Properties’ purchase of the 3 Star 102-unit Artena Manassas. The asset, which will include 14,000 SF of retail/office space, is scheduled to deliver early this summer and traded for $17.5 million ($171,570/unit). While no properties sold in 2016, a blockbuster deal recorded last year. In July 2017, the 576-unit Point at Manassas sold for $115 million ($199,700/unit) at a 5.4% cap rate. This equates to $25 million in appreciation since it sold in July 2004 for $90 million, although that is just 1.9% compound annual appreciation. In April 2003, the property sold for $66.2 million at an 8.2% cap rate, so compared with that sale the property has appreciated at a rate of 3.95% per year.

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