South Jersey Leads Philadelphia Region in Multifamily Market Resilience to COVID-19

It’s not often the Garden State’s commercial property market flexes its muscles on the national stage. Enter 2020, the year when the only thing to expect is the unexpected.

The once-in-a-lifetime effects of the coronavirus are not only upending long-held investor assumptions on which markets are safest, they’re also unveiling resiliency in markets and properties that arguably deserved more investor attention in the first place.

In July, we highlighted how Philadelphia’s apartment sector is proving to be one of America’s healthiest markets in the face of the coronavirus with the lowest concessions rates nationally and asking rents now well above their pre-pandemic peak.

Diving deeper into the data reveals that South Jersey is leading the Philadelphia region’s charge in asking rent growth. Apartment rents here are up more than 3.5% year over year.

"We have done really well," said Caroline Adillon, president of Viking Residential, which owns more than 1,900 units worth of workforce housing properties, which is housing geared toward middle-income households, throughout the Philadelphia metropolitan area, most in either South Jersey or Lower Bucks County.

"Our occupancies have stayed above 95% at all three of our South Jersey properties since the pandemic started," Adillon said. "People don’t want to move today if they can avoid it, so our turnover is way down. This has drastically reduced our expenses and helped us tighten qualifying guidelines on the few units that are opening up."

The region’s resilience partly ties back to its lower levels of new apartment development heading into the pandemic.

Most recent apartment construction in the Philadelphia suburbs has been focused in western suburbs such as King of Prussia and Exton, leaving South Jersey apartment owners with fewer new properties to compete with.

There’s also been a groundswell in development of distribution centers along Interstate 295, by e-commerce retailers seeking to speed up their home deliveries.

South Jersey is a natural fit for these operations given its location squarely in the middle of the western hemisphere’s largest center of purchasing power, minutes from Philadelphia, but also right between New York City and the Greater Baltimore/Washington Area.

Since 2015, more than 27 million square feet worth of distribution centers have started construction in the four South Jersey counties of the Philadelphia metropolitan area. Even after coronavirus-related cuts, transportation and warehousing employment in these counties is still up by more than 33%, or 9,000 new jobs over the past five years.

The federal government’s enhanced $600 per week unemployment benefits have also played a key role in supporting South Jersey’s economy and apartment market, signaling risks if stimulus is further scaled back. But these benefits were cut to $400 per week at the end of July, and South Jersey apartment rents only continued to increase.

Meanwhile, there’s no end in site to the boom in distribution employment that has underpinned South Jersey’s job market. Target, Amazon, Premier Technology and Burlington Coat Factory are all set to open new distribution centers larger than 200,000 square feet in late 2020 and early 2021.

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