Northeast Pennsylvania is seeing higher rents but elevated vacancies across its multifamily market, according to a fourth-quarter and 2024 report from Colliers, which analyzed the performance of Class A, B & C assets.
Vacancies for Class A and B properties ticked up to 8.1 percent, a 1.2 percent increase from the end of 2023. The category went up slightly higher by 1.5 percent to 7.3 percent for Class C's. That came as Class A and B asking rents saw a 1.9 percent increase to $1,653 per month. Class C's actually performed better, at a four percent rise to $1,428 per month.
Meanwhile, it was the opposite trend for the absorption of units. For example, leasing in 2024 remained negative at -26 for Class C's, representing a -250 percent spike from the previous year. Class A and Bs stayed in positive territory and nearly tripled from 34 to 98 units.
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As far as building goes, construction plummeted for Class A and B's from 144 to 0 units, while inventory increased by 4.8 percent. Class C properties continue to see no new construction, as inventory remains unchanged at 1,775 units, while no new sales for the group of properties were recorded last year. Colliers listed one sale for Class A and B's, which occurred in December. That was for a Cedar Village property, which had a recorded loan of $85,893 per unit.
Looking ahead, Colliers isn't as bullish on Northeast Pennsylvania on multifamily sales volume due to its slower growth in the employment and population segments compared with some major metros. Also, the area isn't filled with big multifamily portfolios.
"Much of the larger metro stabilization comes from major portfolio transactions, which will not occur in Northeastern Pennsylvania simply because of our lack of large portfolios of multi-family properties," Colliers wrote.
"We may see properties here sell as one-offs when an institutional seller has one or two properties in Northeastern Pennsylvania that could be rolled up with others in a multi-state deal across the US."
The CRE firm does highlight one potential positive that could boost multifamily in Northeast Pennsylvania. That's if the Federal Reserve continues to cut interest rates in 2025. Right now, however, as inflation spikes, the direction the central bank will take in the months ahead is not clear.
Jeff Algatt, senior vice president of Colliers, whose coverage spans through the Philadelphia Tri-State region, is advising investors in the area to "keep your powder dry" and "your eyes open."
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