Despite the rush of new rental units coming to the Center City market, reduced vacancy rates and increased rents in building of 50+ units show that demand is following pace with the new supply coming on the market.
Philly is quickly gobbling up new apartment buildings
7/28/2015, Jon Geeting
Last year, a lot of writers were wondering whether Philly was experiencing a multi-family construction bubble. There's been a lot of multi-family residential construction, mostly concentrated around greater Center City, over the past few years, and there is a lot of interest in the question of how fast all that new supply is being swallowed up.
So I was interested to read at the end of Alan Heavens' report on 2116 Chestnut in The Inquirer last week that the vacancy rate is still extremely low and still falling.
"William Rich of Delta Associates, of Washington, which tracks the rental market, said the apartment vacancy rate in the city fell to 1.6 percent in the second quarter from 5 percent a year earlier. This occurred even while competition in the market, especially in Center City, continued to increase, Rich said.
Effective rents -- minus concessions and allowances -- rose 4 percent in the same 12 months, he said, to an average of $2,226 a month for high-end high-rise units."
A year ago, some forecasters were predicting conditions would loosen and vacancies would rise as new supply came on the market, but the apartment market around Center City at least has only gotten tighter.
I asked Lauren Gilchrist at JLL for some more context on the low vacancies, and she sent me the following chart, explaining that the absorption rate has been very high, at least for large new buildings.
"In terms of why the rate may be so low, see below" she said in an email. "A lot of our newest, most high end product is upwards of 90% leased, with extraordinarily fast lease up rates."
Read the rest at PlanPhilly.com