MARKET SNAPSHOT: Abandoned Projects See New Life as Vacancy in Philadelphia Trends Downward
By Philip Shea, Associate Editor
After eliminating 2,500 jobs last year—reducing employment by 0.1 percent—Philadelphia is expected to add 27,000 workers to the payrolls in 2012, expanding overall employment by 1 percent. According to Marcus & Millichap, a great bulk of the job gains has come from the education and health services sectors, which added 13,900 workers to the payrolls over the last four quarters.
With such a marked expansion of the labor force, demand continues to accelerate and reshape the condition of multifamily in the city. Average asking rents increased 1.1 percent in the last two quarters of 2011, jumping from $1,032 per month to $1,044 per month, and rose and additional 0.4 percent—to $1,048 per month—in the first half of 2012.
Marcus & Millichap projects that asking rents will rally even further by the end of the year, making an annual increase of 2.5 percent to $1,070 per month. Effective rents will make an even bigger leap, rising 3 percent to $1,028 per month by January 2013.
In response to the favorable trends across the metro, developers plan to ramp up construction and resume projects that had been stalled due to the recent recession. Approximately 1,700 units are currently under construction in Philadelphia, and around 1,000 of these are expected to be delivered by the end of the year, increasing the city’s multifamily stock by 0.5 percent.
One of the projects to recently come online is the 230-unit Jefferson at West Goshen, which boosted stock in the Central Chester submarket by 2.6 percent. This area, located to the southwest of Philadelphia proper along the Delaware River, currently sports a vacancy rate of 2.3 percent and remains the second-most expensive submarket after the downtown area, making it a point of interest for developers.
As of now, over 5,600 units remain on the drawing board for the metro area, and areas that will see considerable expansion will be the Burlington, Upper/Lower Merion and downtown submarkets. With local homeownership falling to levels not seen since the late ‘80s, it is expected that multifamily in Philly will remain strong in the coming years, with emerging demographics continuing to favor renting over buying.
For more news from Philadelphia, click here.