Friday, March 15, 2024

Apartment Rent Growth in Pennsylvania Exceeds National Average

By Brenda Nguyen and Veronica Miniello

Pennsylvania's largest apartment markets have demonstrated resilience, surpassing both national and statewide rent growth trends in the first quarter of 2024, except for Pittsburgh.

Lancaster, Scranton and York posted impressive annual rent increases exceeding an average of 3%, making them the top performers in the state. These tertiary apartment markets, along with the state capital Harrisburg and Reading, have benefitted by not seeing the same level of new apartment construction as larger cities such as Philadelphia. Limited supply, alongside a modestly growing population and an influx of residents from costlier areas like New Jersey and New York, has contributed to stable rent growth.

What's more, Harrisburg, Reading, Lancaster, Scranton and Allentown were recently recognized as the nation’s top places to retire in 2024 by U.S. News. This publicity, combined with the region’s existing affordability, has attracted renters seeking a slower-paced lifestyle near amenities like healthcare, local shops, restaurants and community events. The appeal of smaller towns with limited development has created an increasingly competitive apartment market for renters seeking alternatives to costlier cities.

Philadelphia presents a contrasting picture. Rent growth has softened more significantly, dropping from an average of 3.4% in the first quarter of 2023 to 1.5% in the first quarter of 2024. Despite experiencing the highest level of development since the 1970s, Philadelphia's annual rent growth has outperformed national and state averages, although marginally.

This performance can be attributed to robust rent growth in Philadelphia's suburbs, where construction has been limited. Meanwhile, the city has seen stagnant rent growth in some neighborhoods due to a high concentration of new development. However, Greater Center City's residential population has grown by 3% in the last four years, helping buoy rent growth in the city’s downtown neighborhoods amid a surge of apartment completions.

On the western side of Pennsylvania, Pittsburgh posted positive annual rent growth of 1%, outperforming the national average but falling slightly below the statewide average of 1.3%. Pittsburgh is the only metropolitan area in Pennsylvania that has consistently lost residents since 2020. Similar to Philadelphia, an influx of new units in downtown Pittsburgh has weighed on rent growth, which has been negative in the downtown area over the past six months.

Overall, Pennsylvania's apartment market offers a mix of opportunities for renters and investors alike, with Central Pennsylvania emerging as a region to watch for continued rent growth and stability.

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