Overview – Woodbridge/I-95 Corridor is a suburban, commuters market that is popular among young families and renters alike for its affordability. It is not as accessible as other suburban submarkets like Arlington or Fairfax, but commutes to D.C. are reasonable. Oversupply was a mid-cycle concern due to an unprecedented supply wave, pushing vacancy to an all-time high in 2014. Although it quickly recovered in the years following, negligible absorption in 2017 and delivery late last year pushed vacancy back above the metro average briefly. Rents rebounded strongly in 2018, but nothing of note has traded last year. This year is already off to a hot start, with The Enclave at Potomac Club Apartments selling for more than $90 million at a 4.8% cap rate.
Vacancy – Concerns of oversupply were warranted but have been quelled thanks to strong demand and a dearth of deliveries over the past few years (the December delivery of the 402-unit Rivergate notwithstanding). New deliveries have generally leased well. For example, the four buildings that opened in 2014 (comprising 1,145 units) leased an average of about 20 units per month, faster than the metro average of about 16 units per month during that time. One of the stronger performers was the 308-unit Stonebridge Terrace Apartments, which opened in June 2014 and stabilized in 12 months, leasing roughly 23 units per month. The most recent delivery, Rivergate, completed in December 2017 and was more than 60% occupied as of Q4 2018.
Woodbridge/I-95 Corridor residents are young, and the submarket has a median age of 33. That is similar to the median age in Rosslyn and slightly younger than in Adams Morgan/Columbia Heights, submarkets with reputations for attracting young professionals. The appeal of living here is much different from the appeal of Adams Morgan or Rosslyn, which provide more transit-oriented, live/work/play environments. Much of the appeal for young residents in the Woodbridge/I-95 Corridor Submarket comes in the form of starter-home affordability. This is one of the most affordable submarkets in the metro, and the median home price is half that of Adams Morgan/Columbia Heights or Rosslyn. In fact, in recent years, there was a general out-migration of 25–34-year-olds from Northern Virginia neighborhoods into second-ring suburban submarkets like Woodbridge/I-95 Corridor or similar areas like Loudoun and Fauquier Counties.
Furthermore, Marine Corps Base (MCB) Quantico and Northern Virginia Community College’s Woodbridge Campus are here and also contribute to the below-average median age. The Woodbridge Campus has over 11,000 students, and an estimated 12,000 civilian (including families) and military personnel are based at Quantico. Quantico provides an extra boost for apartment demand here—because service members are transient, they are much more likely to rent than own. According to the leasing agent at the Stonebridge Terrace Apartments, most tenants are military or government workers.
Rent – In Q4 2018, rents posted the healthiest year-over-year gain since late 2016. Much of these gains can be credited to the above-average absorption which has brought occupancies back in line with the metro average. With recently built properties reaching stabilization, no new units under construction, and the continued investment from recent acquisitions in adding value to properties, rent gains could continue.
The Woodbridge/I-95 Corridor is one of the more affordable areas in the D.C. metro, with average submarket rents of about $1,500/month, roughly 10% lower than the metro average. One reason for Woodbridge/I-95’s popularity is low rents that allow tenants to splurge on 4 & 5 Star apartments. But this gap continues to close. Average asking rents at the three properties delivered since 2015 were about $1,800/month as of Q4 2018 but only one property has been able to push rents since delivering.
Construction – The big wave of mid-cycle deliveries are leased up, and no properties are under construction, alleviating concerns of oversupply. Recent new supply has significantly expanded 4 & 5 Star stock, which was sparse prior to 2009 when it amounted to only 700 units. Since then, 4 & 5 Star inventory has expanded by 500%. That sounds extraordinary, but considering how scarce that inventory was, there was plenty of pent-up demand to lease it up. Low vacancy in that segment is a testament to this demand, and until December 2017, 4 & 5 Star vacancies were about equal to that of 3 Star assets.
Another factor that may contribute to strong 4 & 5 Star demand is relative affordability. Asking rents in 4 & 5 Star apartments are around $1,650/month, about 30% cheaper than the market average. In fact, the average cost of a 4 & 5 Star apartment in Woodbridge/I-95 Corridor is equal to the 3 Star rate metro-wide. Renters who work in one of the metro’s primary office nodes and are willing to sacrifice time commuting could find affordable high-end apartment living here.
Sales – The $90 million sale of the Enclave at Potomac Club Apartments in January 2019 has already boosted sales volume. Sales volume was descending each of the last two years, with nothing of note trading in 2018.
Fairfield Residential sold the 4 Star, 406-unit Enclave apartments for $90.4 million, or $223,000/unit, at a 4.8% cap rate. The property was one of the first new luxury apartments to deliver in the submarket this cycle. From 2013-18, rents grew about 6% cumulatively and the property was fully leased throughout.
The previous middle years of the cycle marked above average volume and pricing, and as a result, many of the institutional grade assets here have already traded hands. Of the few that remain, a similar buyer profile to who has been active already in recent years could buy into the submarket, as demonstrated by Mesirow Financial’s recent purchase. The vast majority of the buying activity has come from large, private companies scattered across the country. Dweck Properties has invested the most money, acquiring two assets. The first, Rolling Brook Village, was purchased in 2015 for $138.5 million ($189,000/unit), and the second, The Sutton, was bought in 2016 for $104 million ($248,000/unit). Other large buyers include Bell Partners, Penzance, Friedkin Investment Co, and Federal Capital Partners.
The trend in many outer-ring, suburban submarkets has been value-add plays, but this submarket is bucking that trend somewhat. Most of the volume, and the priciest sales since 2015 have come from newly built assets. The aforementioned Sutton was built in June 2015. Bell Stonebridge was built in June 2014 and sold in 2015 for $75.8 million, and Stone Pointe was built in September 2014 and sold in late 2015 for $69.5 million.
- Woodbridge/I-95 Multi-Family Report Q1 2019
- Woodbridge/I-95 Office Report Q1 2019
- Woodbridge/I-95 Industrial Report Q1 2019
- Woodbridge/I-95 Retail Report Q1 2019