The apartment market in Center City continued to show
signs of strength in 2014 but there are some indications that 2015 will be a
telling year for the local multifamily sector as projects get completed and
more units become available.
In Center City, landlords of Class A apartments saw rents
surge by 3.7 percent to $2,128 a month, or $2.23 a square foot, and the vacancy
nudge up slightly to 5.7 percent from 5.5 percent.
Though healthy, there are some cracks starting to appear.
"The city's apartment market metrics continue to be
affected by a rising tide of supply, especially in Center City," said a
research report by Delta Associates that analyzed last year's Philadelphia
multifamily market compared with 2013. "Vacancy experienced an uptick at
year-end 2014 as more units delivered. On the other hand, this same increase in
new Class A product, combined with the growing flight to quality, has helped
bolster rent growth in the city. A more competitive landscape is expected in
2015 as pipeline developments come to fruition."
By Delta's count, a total of 4,104 units are either under
construction now or on the boards that could hit the market in the next three
years and will translate into the vacancy rate rising and rent growth slowing.
However, if current trends remain, in which Millennials and Empty Nesters
continue to move to urban areas, companies add jobs and delays younger folks
buying a house, then the additional units have the potential to be absorbed
without wreaking havoc on the Philadelphia market.
The analysis showed the suburban market also continued on
an upswing and remains healthy. Rents went up by 3.4 percent to $1,458 a month,
or $1.43 a square foot, and concessions have dried up. The vacancy rate
declined to 4.4 percent compared with 5.6 percent in 2013.
Source: Philadelphia
Business Journal
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