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February 14, 2018

Philly on pace for nearly 4,000 new apartments in 2018

Development Housing
Carroll - Philadelphia Skyline Buildings Thom Carroll/PhillyVoice

The Philadelphia skyline seen from the 'Dalian on the Park' building above Whole Foods Market near the Benjamin Franklin Parkway.

As the population of Center City continues to grow, Philadelphia saw its downtown apartment vacancy rate fall from 10.3 percent in the fourth quarter of 2016 to 7.6 percent in the fourth quarter of 2017.

That was at the end of a record year in total construction completions in the broader metropolitan statistical area, where 4,040 new units delivered in 2017. The vacancy rate beyond Center City increased by 3.9 percent due to the influx of apartments, but the net absorption rate on those units was positive, according to a new report by real estate services firm Cushman & Wakefield.

Several of Center City's most anticipated projects over the past few years — East Market, Lincoln Square and the Franklin Tower Residences — are on pace to deliver in 2018. Philadelphia should expect one more big year for apartment growth before things start to tail off a bit.

"Construction activity will remain strong in 2018 with 3,826 new units expected to deliver in the Philadelphia MSA," the report states. "However, by 2019 and 2020, construction activity is forecasted to drop off considerably."

The influx of new apartments comes as City Council, developers and neighborhood groups continue to weigh the pros and cons of a mixed-income housing bill that would require more inclusionary units in future residential projects. An amended version of the proposed legislation, reworked after a contentious debate late last year, awaits a vote by City Council.

One upshot of the combined growth in downtown population and housing supply — without an affordability requirement — is that asking rents are expected to increase by 3.5 percent by the end of 2018.

By the end of 2017, asking rental rates increased by 4.0 percent year-over-year to an average of $1,290 per unit, up from $1,241 at year-end 2016. The effective rental rate was $1,246 per unit, up from $1,220 in the fourth quarter of 2016.

Check out the full report here.