Firm Releases Fourth Quarter 2016 Research Findings

The end of 2016 was marked by declines in overall vacancy rates, rising asking rents and record-setting construction activity in the Philadelphia apartment market, according to Cushman & Wakefield. The commercial real estate services firm’s Philadelphia research team released its fourth-quarter 2016 Multifamily Marketbeat report for the region.

“The vacancy rate for the Philadelphia MSA’s apartment market decreased to 3.6 percent in the fourth quarter of 2016, down 40 basis points from the fourth quarter of 2015,” said Jared Jacobs, Cushman & Wakefield Research Manager. “The primary reason for the decline was due to the 3,786 units that were absorbed in 2016, the highest annual absorption total on record for the market.”

Overall asking rental rates increased by 4.0 percent in 2016, the largest annual growth since 2007, to $1,236 per unit. Effective rents grew by 4.2 percent year-over-year, also the largest growth rate since 2007, to $1,191 per unit.

In Center City Philadelphia, the vacancy rate increased to 8.8 percent in the fourth quarter of 2016, up 360 basis points year-over-year. Contributing to the increase in vacancy were the 3,033 new units that delivered within the Philadelphia MSA, 36.6 percent of which were constructed in Center City. The 1,109 new units that delivered in Center City in 2016 represented the highest annual new construction total on record for the market.

Despite the rise in vacancy, net absorption in Center City was positive in 2016 with 368 units absorbed. Average asking rents increased to $2,121 per unit, up 5.2 percent from 2015. Effective rents in 2016 also rose to $2,089 per unit, a 6.0 percent increase year-over-year.

New construction in the Philadelphia MSA totaled 3,033 new units delivered to the market in 2016. Combined with 2015 totals, 6,722 new units have been constructed over the past two years, an increase of 2.9 percent over the total number of units delivered from 2010 to 2014.

Construction activity is expected to remain robust in the Philadelphia MSA moving into 2017, with 5,499 new units scheduled to deliver and 34.2 percent of that new inventory located in Center City Philadelphia.

“Driven by the increase in new construction, both asking and effective rental rate growth is forecasted to increase by 3.6 percent and 3.5 percent, respectively by year-end 2017,” said Jacobs. “Net absorption is also projected to increase to 3,797 units in the Philadelphia MSA, with Center City accounting for 30.9 percent of that total.”

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