The Philadelphia Metro Multifamily sector can be defined in two ways currently: a market that's seeing strong demand across the board, with older properties continuing to fill up. Yet, local investors remain cautious with inflationary pressures, forcing an increased concentration on improving their current portfolio.
It comes from a CBRE first-quarter market report that revealed net absorption of 7,811 units in the last 12 months through the end of March, with occupancy averaging 96 percent.
The Center City Philadelphia submarket is seeing the strongest demand, with 1,849 units absorbed, followed by Northeast Philadelphia and Southwest Philadelphia at 1,586 units and 1,298 units, respectively.
For occupancy, CBRE revealed the performance based on the year built. The performance was the strongest among the oldest assets tracked, which were 1960s and 1970s properties, which averaged a 96.7 and a 96.6 percent rate, respectively. Also, year-over-year, the two gained modestly by 20 and 30 basis points, respectively. However, those built in the 1980s, 1990s and 2010s — all experienced occupancy drops.
Overall, rent growth was strong, with three-bedroom units in the Philadelphia Metro area seeing a surge of 7.3 percent, averaging $3,064. Two bedrooms rose by 4.8 percent to $2,249 on average, while studios and one bedrooms saw increases in the mid to upper three percent range.
CBRE attributed the strong first quarter performance to "robust early spring leasing activity." However, investment activity remains weak.
"Investors remain cautious as owners prioritize occupancy over rent growth, still relying on one to three months of concessions to reach stabilized occupancy ahead of the slower leasing months," the CRE firm revealed.
For now, landlords are focusing on improving their current portfolio to boost value —rather than expansion — as rate cuts become less likely due to a recent surge in inflation.
Going forward, CBRE expects strong leasing demand in Northern Liberties, Fishtown and Kensington — areas where supply is more prevalent.
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