Annandale Multi-Family Submarket Q1 2019


Overview – The Annandale Submarket is the gateway between Fairfax and Arlington County and is characterized by strip malls, shopping centers, and freestanding retail and office structures. The area is not pedestrian-friendly, and residents generally need a car to get around. The submarket has had very little new apartment construction since the 1980s—the last major property was added in 2009—resulting in vacancies well below the metro average, but it has also struggled with negative absorption and softening rent growth. This submarket is characterized by the large garden-style apartment communities that drive Annandale’s fundamentals. Its inventory is mostly 3 Star garden-style apartments, with a higher share of two and three-bedroom units than is usual for the metro. The inventory makeup is not expected to change anytime soon given the quiet construction pipeline.

Vacancy – A lack of supply has kept vacancy rates below the historical average, but demand in Annandale could continue to suffer as renters leave the submarket for the higher-quality inventory and metro access in Falls Church/Vienna, Arlington, and Alexandria. Absorption has been negative in three of the past five years.

The local job market is powered by retail employment, government, technology, and Northern Virginia Community College. The submarket’s white-collar jobs drive demand for 3 Star and 4 & 5 Star assets with convenient accessibility and a variety of amenities. Only one high-end asset exists in the submarket—Greystar’s Bailey’s Crossing apartments, which delivered in 2009. Metrorail does not serve the Annandale Submarket, but four stations are in the adjacent Falls Church/Vienna Submarket north of Annandale.

Rent – Average asking rents in Annandale are almost $1,700/month, roughly 5% lower than the metro average. Rents improved the past two years, growing about 4% cumulatively, but this pales in comparison to the nearly 4% annual gains from 2010-15.

However, rent growth bears watching, particularly given the frequent negative absorption. Annandale’s affordability and proximity to the region’s important employment nodes allowed it to perform well early in the cycle, but those advantages are not enough to boost the forecast for growth since affordability will likely be an issue for submarkets like this one. Because Annandale is a renter-by-necessity submarket, landlords can only push rent so far before it consumes too much of renters’ incomes and they move. Competing car-centric areas like the Columbia Pike Corridor in Arlington may be soaking up some of the demand Annandale has left on the table.


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