Mega-Developments Abound in Philadelphia
Despite a multifamily supply surge in recent years, occupancy in stabilized properties saw only a modest decline of 30 basis points year-over-year in July.
Multifamily demand remains strong in Philadelphia, bolstered by job growth and household formation. Despite a supply surge in recent years, occupancy in stabilized properties declined just 30 basis points year-over-year, to 95.6 percent as of July.
Employment gains were led by education and health services (18,700 jobs). Growth is set to continue, boosted by projects such as the $1.5 billion Penn Medicine Pavilion, which will expand the University of Pennsylvania Hospital by 1.5 million square feet. Professional and business services gained 12,000 jobs. A series of mega-projects is expected to meet the rising demand for office space, including the $1.5 billion, 60-story Comcast Technology Center. Earlier this year, construction began on Schuylkill Yards, a $3.5 billion development that aims to create a hub for technology and life-science companies. Located on the west side of Philly’s main Amtrak station, the project site is one of the three that the city pitched for Amazon HQ2, alongside uCity Square and the Navy Yard.
Investors competed for both urban and suburban assets, with $810 million in communities changing hands this year through July. Development has also been significant, with the delivery of 3,575 units this year through August. Overall, we expect Philadelphia rents to grow 2.4 percent in 2018.