Philadelphia Multifamily Report – Winter 2020
A slow pipeline and enduring demand have reinforced the metro's steady fundamentals going into 2020.
Philadelphia’s relatively tepid 2019 pipeline generated a spike in rents, which have been outpacing the national average since last April. Demand remained consistent, boosted by ongoing employment gains and household formation. Meanwhile, occupancy inched up 10 basis points over 12 months to 95.6 percent as of November.
The metro remains a top presence among the nation’s economic powerhouses, thanks to its innovation economy, particularly in the biomedical sector. Professional and business services led employment growth in the 12 months ending in November with 9,100 new jobs, followed by education and health services (7,600 jobs). Additional positions are expected as new projects come online, including Penn Medicine’s $1.5 billion Pavilion, a 1.5 million-square foot extension of the Hospital of the University of Pennsylvania, scheduled to open in 2021.
Some $1.4 billion in multifamily assets traded in Philadelphia last year, as investors focused on value-add opportunities in suburban locations, where acquisition yields can approach 8.0 percent for Class C assets. Developers delivered 3,456 units last year, while another 14,200 apartments were underway as of December. Construction activity was intense in the Center City area, which holds 42 percent of all city jobs, as well as in the North–East. In the suburbs, Hatboro–Warminster topped the pipeline.