Q4 2022 Multifamily Real Estate Report: Philadelphia, PA
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Philadelphia is known as the birthplace of American democracy, housing the iconic Liberty Bell, Independence Hall, and several major companies like Proctor & Gamble, Dun & Bradstreet, and Vanguard.
Unemployment in the city was at 4.2% by the end of Q4 2022, higher than the national average at that time.
There was a 0.38% increase in the city’s metro population from 2021 to 2022.
In Q4 2022, Philadelphia’s multifamily real estate market saw rising vacancies, declining rents, and decreasing construction volume.
General Area Overview & Demographics
Philadelphia is the largest city in Pennsylvania, with a population of approximately 1.6 million people as of 2021. The population is diverse, with a racial makeup that includes 41% Black, 34% White, 14% Hispanic, and 7% Asian residents.
Philadelphia, PA Median Household Income & Population
The median household income in Philadelphia is $49,931, which is lower than the national average. Approximately 25% of the population lives below the poverty line, which is above the national average. Residents of the city struggle to keep up with monthly rent payments.
With a median age of 34, Philadelphia has a relatively young population. Those under the age of 18 make up approximately 21% of the people, while those over the age of 65 represent 14%.
Several prestigious universities, such as the University of Pennsylvania, Drexel University, and Temple University, call Philadelphia home. These institutions attract students worldwide and play a significant role in the city’s economy.
Independence Hall, the Liberty Bell, and the Philadelphia Museum of Art are just a few of the major attractions that make Philadelphia a city rich in history and culture. These landmarks draw millions of visitors to the city annually.
Philadelphia experiences a humid subtropical climate with four distinct seasons. The summers are hot and humid, with average temperatures in the high 80s°F, while the winters are cold, with temperatures averaging in the mid-30s°F. With an average of 42 inches of precipitation annually, most of it falls during the summer months.
Summary of Philadelphia Multifamily Real Estate Performance in Q4 2022
Compared to other major cities in the Mid-Atlantic, Philadelphia has experienced a slower decline in multifamily real estate absorption.
In the city’s metro area, Class A vacancies increased by 2.3% to 4.8% during Q4 2022, while Southern New Jersey had the lowest stabilized multifamily vacancies at 3%.
Furthermore, vacancies increased significantly in both suburban Philadelphia, which saw an increase of 1.6% to 3.9% from December 2021, and Southern New Jersey, where vacancies increased by 1.4% from 1.6% at the same time last year to 3% in December 2022.
What are multifamily rents like in Philadelphia?
Average asking rents for Philadelphia multifamily real estate fell from $1,800 per month in Q3 2022 to $1,768 in Q4 2022.
At the beginning of Q4 2022, renter-by-necessity units saw a 0.5% rise in monthly rents to $1,525; renter-by-choice rates increased by only 0.2% to an average of $2,011.
Purchase & Leasing Activity
The overall annual sales volume reached over $2.5 billion for Philadelphia multifamily real estate, more than 2021’s total of about $2.4 billion. This is worth noting, as nationwide volume declined year-over-year.
While sales volume increased, the number of properties transacted decreased from 75 in 2021 to 65 in 2022. The price per unit rose annually from $185,000 to about $234,000.
The Fairless Hills-Morrisville submarket led all submarkets in investment volume at $455 million. The Northwest-East submarket was the next-highest at $429 million.
Notable Multifamily Real Estate Deals in Philadelphia in Q4 2022
There were several notable deals that took place for Philadelphia multifamily real estate in Q4 2022:
- Rushmore Management purchased Racquet Club for $397 million.
- Brookfield Properties purchased Briggs & Union for $158 million.
- New York Life Real Estate Investors purchased Pennbrook Station for $107 million.
These are select examples among other activity.
New Multifamily Real Estate Development Activity in Philadelphia in Q4 2022
Through Q4 2022, over 2,400 new multifamily units came online, one of the lowest numbers of new quarterly deliveries the city has seen in recent years. This is in contrast to Q4 2021’s decade-high of 7,700 units.
There were nearly 16,000 new multifamily units in the construction pipeline by the end of Q4 2022.
Market Forecast for Philadelphia’s Multifamily Real Estate Market
With a few large projects coming online in 2023 and Philadelphia’s population declining, expect vacancies to rise and rents to lower further.
Rising interest rates and a slow construction pipeline should further delay new activity.
Do your research, stay diligent, and happy investing.
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