Philadelphia—During the first half of the year, interest in Class A properties in the Philadelphia metro increased, according to Marcus & Millichap’s third quarter report.
Velocity increased 65 percent over the past 12 months, with a 37 percent increase in the number of properties with fewer than 100 units changing hands.
Aggressive pricing pushed down cap rates to less than 6 percent, which has, in turn, forced many investors to look further down the quality scale. Consequently, Class B assets in A locations have seen cap rates fall about 75 bps, to the low- to mid-6-percent range.
The median price per unit decreased about 2 percent, to $80,400. Prices for larger deals varied, with distressed assets selling for about $35,000 per unit and better-quality assets transacting at unit prices of $100,000 or more.
Asking and effective rents increased 0.5 percent and 0.6 percent, respectively, in the second quarter. So far this year, asking and effective rents have risen 1 percent and 1.2 percent, respectively.
In the Pennsylvania submarkets, effective rents rose 1.3 percent from the year prior, while effective rents in South Jersey rose 1 percent over the past six months.
For the year’s entirety, Marcus & Millichap projects asking rents to increase 3 percent, with a 3.5 percent increase in effective rents rents.
The Somerton/Bustleton submarket had the lowest vacancy rate (2.2 percent) as of the third quarter, followed by Foxchase/Lawndale (2.5 percent) and Upper Bucks County (2.6 percent). The highest vacancies were seen in Cherry Hill/Eversham (9.6 percent), Norristown/Plymouth (9.7 percent) and Bala Cynwyd (10 percent). Center City was in about the middle of the pack, at 4.5 percent, but it also, unsurprisingly, had the highest effective rents ($1,569 per month, compared to the $716 monthly rents in Foxchase/Lawndale.)
No new rentals were delivered in the first half of 2011. For the balance of the year, 500 units are slated for delivery, with the bulk consisting of the 317-unit Abitare in Camden County. The planning pipeline, meanwhile, consists of 3,800 units.