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Multi-Housing Market in Philadelphia Still Strong in 2015 Despite Below Average Job Growth

Tuesday, June 16, 2015

The overall economic recovery in the Philadelphia metro area has been slow compared to the U.S., however, digging deeper into the job numbers, there are subsectors that dominate the metro area employment and those sectors are adding a fair amount of jobs. Economic and Population TotalsThe Philadelphia economy is dominated by three stable industries: education and health services (22 percent); professional and business services (17 percent) and trade, transportation and utilities (18 percent).

Philadelphia’s job growth ended 2014 at 0.6 percent and is expected to increase by 40 basis points (bps) to 1 percent in 2015, showcasing opportunities for multi-housing buildings for sale in Philadelphia. The pace of job growth is expected to pick up through 2016.

 “Despite lower-than-national-average job growth, apartment demand in Philadelphia is still high,” Axiometrics noted. “As job growth increases, that demand is likely to continue.”

Philadelphia Multi-Housing Development

According to Axiometrics data, 2,016 new multi-housing units came online in 2014. New apartment supply is expected to reach 3,183 units in 2015, after which new supply is forecast to stay just below the 2,000 unit mark for the next three years, highlighting growing demand for multi-housing buildings in Philadelphia.

Multi-Housing Building Occupancy and Absorption

Occupancy increased to 95.3 percent in 2014, 80 bps below the 1998-2014 average of 96.1 percent. Philadelphia’s multi-housing buildings' occupancy rate is forecast to remain strong in 2015, but lower somewhat to 95.1 percent. Absorption was 4,189 in 2014 and is expected to lower to 1,184 units in 2015.

Class B had the highest occupancy of any asset class in Philadelphia in November 2014, with an occupancy rate of 95.6 percent, 70 bps above Class A properties, which had an average occupancy of 94.9 percent. Class C properties were between the two with an occupancy rate of 94.8 percent.

Philadelphia OccupancyPhiladelphia Completions and Net Absorption 

Rental Rates for Multi-Housing Buildings

Philadelphia’s effective rent growth was 3.5 percent in 2014, fueled by apartment and multi-housing building demand almost double that of new supply. Effective rent growth is expected to be 2.7 percent in 2015, which is also the 1998-2014 average effective rent growth before reaching 3.4 percent in 2016.

Whereas Class C properties had the highest occupancy in November 2014, they also had the lowest effective rent growth: -1 percent. Classes A and B had effective rent growth of 3.9 percent and 3.5 percent respectively.

Philadelphia Rental RatesPhiladelphia Annual Rental Rate Growth

Contact HFF Philadelphia for more information regarding multi-housing properties on the market in this area.

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