Tuesday, October 29, 2019

Philadelphia's Horsham/Willow Grove Suburb Readies for Wave of New Apartment Units

Philadelphia's Horsham/Willow Grove suburb has hosted very little new apartment construction over the past two decades.

Developers have generally focused their attention in and around Center City, as well as in Philadelphia’s western suburbs, which include the metropolitan area’s largest center of suburban white collar employment.

While corporate expansions are much more common along Philadelphia’s Main Line suburbs to the west of the city than they are in the northern suburbs, Horsham/Willow Grove still has a large base of high-paying employers including Prudential, Toll Brothers and Penn Mutual Life Insurance.

Solid apartment demand drivers combined with minimal new construction has produced rent growth averaging 3.9% annually over the past 36 months, which has given developers the confidence to build.

There were nearly 1,000 apartment units under construction at the start of the fourth quarter. Most new construction is contained in the Promenade at Upper Dublin, a highly amenitized property that will contain 400 units and more than 100,000 square feet of planned retail space. While this is the submarket’s largest supply wave in a generation, there are reasons to believe demand is strong enough to quickly absorb the new units.

In total, the submarket contains about 12 million square feet of occupied office space, which based on a simple usage factor of 200 square feet per worker, holds about 60,000 office workers.

The submarket also supports its own respectable live/work/play scene.

Horsham and Willow Grove also have grocery stores, shopping malls and a strong road network with the turnpike and Route 309 nearby.

The new supply is also well positioned to capitalize on the submarket’s strengths. The Promenade at Upper Dublin is rising just one block from the Horsham Gate Shopping Center, which contains a Fresh Market grocer, and is adjacent to a Walmart, Sam’s Club, Petsmart and a range of restaurants.

The Station at Willow Grove is set to begin move-ins during December, and lists one-bedroom rents ranging from $1,300 per month for studio apartments to $2,150 per month for 969-square-foot units. The 175-unit project is across the street from the Willow Grove station on the SEPTA Warminster Line and less than a mile from the Willow Grove Mall.

Vacancies and free rent discounts are likely to rise temporarily among the area’s existing stock of amenitized apartment properties, as long-time owners compete with these new projects for tenants. The Station at Willow Grove is offering to waive December rent for tenants moving in during the first month of the project’s opening.

Nonetheless Horsham/Willow Grove is long overdue for more high end rental options and if the project’s lease up successfully, institutional investors who previously had not considered this submarket will likely begin eyeing the opportunity to add some of these new properties to their portfolios.

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