5th October, 2017
Demand for Philadelphia Apartments is Very Strong

Apartment building and refurbishment in Philadelphia is accelerating at an unprecedented pace and demand for Center City Philadelphia apartments is soaring. According to a recent study entitled 2017 Housing Report: Building on Optimism, 2,506 new housing units in the Greater Center City (the fastest growing residential neighborhood in Philadelphia) were completed by 2016, exceeding the peak of 2,168 that was achieved back in 2013. Additionally, there are currently 4,167 rental apartments in the Greater Center City under construction, with various large and expansive projects taking place in the following areas: City Hall, Old City as well as north and east of Logan Square.

The question is whether the supply can be met in a rental market that accommodates 4,167 new units?

Rent and occupancy levels are strong indicators that have the capacity to assess the market’s responsiveness to new supply. According to a quarterly survey conducted by Delta Associates (which focuses primarily on larger, newer and professionally managed apartments), “the market is exhibiting healthy symptoms, but is also showing signs of cooling, with rents in Philadelphia effectively flat between 2015 and 2016 (+0.1%), and vacancy rising 0.8% to a still very low 3.6%”.

On the contrary, according to RentHub (which takes into account all on-line listings of new and existing rental units, as well as focuses mainly on Greater Center City in its survey), “the 2016 median rent across Greater Center City has increased by 3% throughout 2015, and increased by 7% during 2014. There is a small rent decline from 2015 to 2016 of -1% in Core West Center City, while Core East showed the biggest gain, up 13% from $2.15 per square foot to $2.43 per square foot in asking rent.” Based on the data compiled by RentHub, all four sections of the Extended Center City show an increase in rental prices that fluctuate between 3% to 7%.

The above data coincides with the figures presented in the Zillow Rental Index regarding the multifamily rental market citywide, as it shows rental prices increasing by 3.4% throughout 2015 and 2016.

The development of the new 4,167 rental units, currently under construction, will be more significant and help stabilize rental prices for Philadelphia apartments generally and Center City apartments in particular. According to the report, “If one assumes that 50% of the new supply will be delivered in 2017 and 50% in 2018, that will represent a 14% increase in new supply over 2016 levels, coming on-line in each of the next two years. But, based on announced completion dates, 3,127, or 75%, of these apartments are scheduled for delivery in 2017, representing a 71% increase in new supply over 2016 levels and nearly three times as many apartments to fill than the annual average since 2010.”

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