By Alan J. Heavens | August 2, 2016 Steady employment growth over the last several quarters has created a large pool of renters and helped boost the fortunes of the Philadelphia region's apartment market, real estate investment services firm Marcus & Millichap says.
The increase in jobs - 60,000 new ones are anticipated by the end of 2016 - has resulted in the formation of 23,700 new households in the region over the last four quarters, the firm's research shows. As a result of this increasing demand for rental apartments, Marcus & Millichap says, developers are accelerating construction and permit activity for multifamily projects.
Delivery of 5,600 completed units in 2016 - 2,000 of them in Center City - will be the highest in more than 15 years, the firm's says.
That number, on top of 3,300 units completed in 2015, will cause "some fluctuation" in the region's vacancy rate in coming months, but Marcus & Millichap predicts a "hiring boom" in first-quarter 2017 that will keep the rate below 5 percent and result in steady rent gains through the year.
Average rent will rise at a steady pace, reaching $1,221 a month by this year's end, an annual increase of 3.1 percent, Marcus & Millichap says. That follows a 2.6 percent annual bump in average rent during 2015.
Developers of multifamily housing say their experience mirrors the research findings.
"My sense of the market is that there is demand in Philadelphia like we have never seen before," said David Waxman, a principal in MMPartners, which is turning older buildings into apartments in Fairmount and Brewerytown.
That demand is "coming from people moving to the area," including millennials, empty-nesters, and young professionals, Waxman said.
"For a long time, apartment product in Philadelphia was, frankly, tired," he said. "We are finally seeing design-driven, amenitized rental housing that people expect and demand today."
And they are consuming apartment units as soon as there is a whiff of availability, especially in the edge neighborhoods where Waxman's partnership and others build.
For example, at Fairmount@Brewerytown, a 161-unit building being carved out of part of the old Acme distribution center in Brewerytown, Michele DiVeterano, vice president of operations for developer McSpain Properties, said that eight to 10 studios and one- and two-bedroom units rent every week.
Millennials "are our target market," said DiVeterano. "They are pioneers."