Tuesday, April 16, 2024

Philadelphia’s Multifamily Development Boom Starts To Cool


By Brenda Nguyen Costar

Philadelphia's apartment boom is cooling down after a record-breaking period of construction. As the spring leasing season kicks off, the number of new units under construction has shrunk by more than 30% compared to the peak in late 2022. This downshift reflects developers' and lenders' more cautious approach amid elevated interest rates, slowing rent growth and increasing supply-driven vacancies.

However, the recent pullback is not a complete halt. Current construction levels are still above the region's 10-year quarterly average of 12,800 units. While fewer new projects have broken ground in recent quarters, Philadelphia’s ongoing apartment development pipeline remains robust.

Between now and mid-2025, the region can expect between 2,000 and 3,000 units to be completed each quarter, with the majority located within the City of Philadelphia. The total in 2024 is expected to be the second-highest year of project completions, following last year's record, which will combine to produce plentiful new options in the market for renters.

Greater Center City continues to be a focal point for apartment development, boasting the region's largest multifamily project. Tower Investments' 1,111-unit cornerstone development, encompassing an entire city block just 12 blocks from City Hall, accounts for 6.5% of the region's units under construction. This mega-development ranks as the 11th largest ongoing apartment project across the U.S.

Beyond the city limits, Philadelphia suburban areas are also experiencing growth, albeit at a much slower pace. Cornerstone Tracy's 614-unit project at Oxford Valley Mall in Langhorne stands as the largest suburban development currently underway.

On the horizon, at least 17,200 units across 99 projects are in the proposal stage. Construction starts could pick up as interest rates stabilize, market confidence strengthens, and the surplus of units is absorbed. In the meantime, construction levels are rebalancing toward long-term market trends.


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