By Brenda Nguyen CoStar Analytics
While U.S. vacancy rates climb higher, Philadelphia has already passed its peak — signaling that the local rental market is finding its footing faster than the rest of the country.
Philadelphia's vacancy rate peaked at 7.9% exactly one year ago and has been steadily compressing ever since. Meanwhile, the U.S. market remains on an upward trajectory, with forecasts projecting a national peak of 8.4% next quarter, followed by a gradual decline.
This timing gap puts Philadelphia roughly four to five quarters ahead of the national cycle. Philadelphia landlords weathered their supply wave earlier, while markets in the Sun Belt and other high-growth regions continue to grapple with elevated new supply levels.
Although newly completed apartments are still offering generous concessions in late 2025, the declining vacancy rate suggests that free rent will likely ease significantly by the spring leasing season.
Several factors are behind Philadelphia's faster cycle. While the Philly area set its own development record, its pipeline never reached the extremes of the Sun Belt. Over the past five years, Philadelphia's inventory grew by 14.2%, a modest increase compared to Austin's 40.5%, Phoenix's 27.4% and Dallas' 20.4%. Philadelphia’s more measured supply growth allowed demand to catch up more quickly, pulling occupancy rates higher while other markets remain oversupplied.
Philadelphia’s faster cycle is a reminder that real estate remains a local story, even in a national narrative.
