Monday, September 16, 2024
Wednesday, September 11, 2024
Industrial developers migrate to Philadelphia’s southern counties
By Brenda Nguyen CoStar Analytics
Amid a growing backlog of unleased speculative warehouse developments and heightened interest rates, developers have slowed construction on new projects in Philadelphia's industrial market. However, developers are banking on strong pent-up demand for industrial space with a pipeline of proposed projects that totals over 75 million square feet across 250 buildings, suggesting that development activity is likely to rebound quickly once market dynamics improve.
For context, the Philadelphia industrial market has been grappling with a large influx of new industrial space, with 50 million square feet added in the past three years and 70 million square feet added in the past five.
While not all 250 proposed projects are guaranteed to move forward, the majority are likely to do so. The proposed developments are concentrated in a few key areas, hinting at where future supply pressures will surface. Across the Philadelphia market, five local industrial hubs account for 60% of the region’s proposed development projects.
Tuesday, September 10, 2024
Monday, September 9, 2024
Apartment rent growth in Lancaster tops among eight largest cities in Pennsylvania
By Brenda Nguyen CoStar Analytics
Lancaster, Pennsylvania, has established itself as a thriving apartment rental market over the past decade. Among Pennsylvania's eight largest apartment markets, Lancaster has consistently led the commonwealth in rent growth over the past five years, outpacing the state’s largest cities by wide margins.
Once a quiet county in south central Pennsylvania, Lancaster has continued to see an increase in local residents, including many who have moved from New York City and Philadelphia. The local apartment market had already recorded the lowest vacancy rate of the eight largest Pennsylvania apartment markets, averaging 3.5% in the past decade. In the last three years, vacancy has further compressed to an average of 2.7%.
A lack of apartment options has enabled the market to sustain solid rent growth, averaging an annual increase of 4% over the past decade and 6.3% in the last three years.
Persistently strong annual rent growth has resulted in double-digit rent hikes over the years. In late 2024, Lancaster recorded a 31.5% cumulative rent growth over the past five years, 18.6% in the past three years, and 6.2% in the past 12 months—outpacing the rest of the Keystone State. Lehigh Valley, Scranton and Reading have followed, while the largest cities, Philadelphia and Pittsburgh, have trailed the rest of the state in terms of annualized rent growth.
The rate of increase can be attributed to the region's tight market conditions and increasing demand from local renters.
The region's growing employment base, which has increased by 7.2% in the past three years, has further fueled demand for apartments in the area. This, coupled with the presence of several higher education institutions, such as Franklin & Marshall College, contributes to a vibrant community and steady demand for rental housing.
Lancaster's appeal may have been further enhanced by its recent recognition as a top place to retire. U.S. News & World Report has consistently ranked the region highly for its quality of life, healthcare services and low taxes.
The combination of affordability, small-town charm, and strong employment opportunities has attracted residents, developers, and investors over the years and is expected to attract more in the future.
However, with so little apartment construction underway or in the proposal pipeline, Lancaster’s growing population is expected to face further rent increases in the future.
Philadelphia students scramble to secure housing for the new school year
By Brenda Nguyen CoStar Analytics
As a new school year begins across the nation, many college students in Philadelphia are scrambling to secure housing just weeks before classes start. Following a slow summer pre-leasing season for student housing, a rush of leasing activity emerged over the past month.
Student housing properties, as defined by CoStar, are those that are purposefully built or operated for students, regardless of whether the property is managed by universities or private entities. They typically feature lease terms aligned with the academic year, proximity to campus, furnished units, and amenities tailored for students, such as game rooms and study lounges. CoStar’s pre-leasing data tracks the percentage of leased beds before the first of each September.
In early August, Philadelphia’s pre-leasing rate for student housing reached only 82%, significantly lower than the 91% recorded during the same month last year. By September, leasing rates jumped to 97.1%, an impressive increase of over 15 percentage points month-over-month. This figure even surpasses last September’s pre-leasing rate of 94.7%.
Representatives from local campuses, such as Temple University, report that parents are increasingly active in the housing process, displaying increased price sensitivity and putting off signing lease agreements.
Additionally, technical difficulties with FAFSA, the U.S. Department of Education’s financial aid form, earlier this year prolonged school selection decisions for one million students nationwide, further affecting summer pre-lease rates.
While delaying housing decisions is not always the safest or least expensive choice, it has worked in favor of students in the current market cycle, particularly in urban areas within Greater Center City, where concessions for market-rate apartments are plentiful.
Despite the challenges of the summer, the recent surge in leasing activity indicates that student housing performance remains strong. Rental rates for student housing continue to outpace those of market-rate apartments, even in urban areas where concessions are plentiful.
