Better economy helps region's apartment market

"Modest" economic growth will benefit the Philadelphia region's apartment market during the rest of 2013, with vacancy rates falling and effective rents rising.

Developers will add 2,000 rental apartments to the market, almost doubling the 1,031 completed in 2012, the report said. Building permits for multifamily housing, a measure of future growth, will rise by 5 percent to 3,900, comprising both condominiums for sale and rental units.

(Last week, the U.S. Commerce Department reported that a 31.1 percent jump in apartment construction nationwide in March helped set new-home building on its fastest pace since June 2008.)

There will be two sources of renters for the region's market this year, Marcus & Millichap said. One results from increased employment: 36,800 workers have been added, expanding local payrolls 1.3 percent. The other source results from pent-up demand by young adults who have been living at home and are not ready to buy.

Center City will remain a focus for developers of luxury rentals, with many targeted to affluent buyers moving from the suburbs or seeking weekend getaways or pieds-à-terre.

Vacancy rates will decline to 4.8 percent regionwide, from 5.2 percent, after remaining flat in 2012. As a result, average effective rents will rise 2.1 percent in 2013, to $1,122 a month, the report said.

With prospects for higher returns so good, investor demand remains high.

Sales volume of apartment buildings was lower in the first quarter than in fourth as owners acted to avoid changes in capital-gains taxes.

With that behind them and "ongoing efforts to provide guidance on property taxes from the City of Philadelphia." it expects a higher volume of deals this year.