Report: Philadelphia's apartment market 'volatile'

A question that continually comes up is how is Philadelphia’s apartment market doing and whether the city can absorb multifamily projects hitting the market or in the pipeline.

Reports from a range of sources, from Center City District to Delta Associates, have concluded Philadelphia isn’t getting over built and can handle new units coming on the market and others that are in the works.

Radnor Property Group recently completed constructing 3737 Chestnut, a 26-story, 276-unit apartment building in University City that is ahead of lease-up projections.

However, one recent report is a little more cautious.

Axiometrics, a firm that tracks the multifamily and student housing markets, finds the Philadelphia apartment market has been “volatile” during the last three months.

Rent growth in October dropped by 3.5 percent compared with September, but September rents rose from August, which was a decrease from July.

In other words, rents are fluctuating up and down, month-to-month. October’s average rent was $1,252 a month.

One explanation for this is likely an uptick in concessions.

Apartment landlords in new and not-so new apartments have started to compete for renters by enticing them with a range of offers. A cursory review of a dozen properties show some of the most common concessions include move-in specials, reduced rates on select units, special offers on others and at least one-month free. The need to lure renters in with concessions, no matter how small, does say something about the market and that it may be softening a tad as more new or converted properties come online.

Axiometrics was also concerned about continued job growth in the city, noting 600 new jobs were generated during the last 12 months.

Delta Associates is a bit more bullish in its third-quarter report, stating a combination of a rise in the city’s population and some modest job growth have helped to absorb new apartment inventory, allowing Philadelphia to remain stable so far.

“The Philadelphia area apartment market remains healthy at third quarter 2015, spurred in part by job growth over the past twelve months that was stronger than the 20-year average,” said the Delta report. “Combined with changing demographic and lifestyle preferences, stronger job growth likely will sustain long-term optimism for the regional apartment market.”

The evidence? The city saw a large decline in its vacancy to 2.0 percent from 3.6 percent compared with the same time last year and rents rose by 3.6 percent, the Delta report said.

As it stands now, 4,380 apartments are under construction or expected to come available during the next 36 months in the city.

While that causes some “near-term concerns” that vacancy will rise and rent growth won’t be as robust, Delta believes Philadelphia will continue to remain stable.

Source: Philadelphia Business Journal