PHILADELPHIA PENNSYLVANIA, MSA - Greystone
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SPRING 2020
MARKET INSIGHT
PENNSYLVANIA, MSA
REPORT
PHILADELPHIA
2 PHILADELPHIA METRO
EMPLOYMENT /
UNEMPLOYMENT
The Philadelphia-Camden-Wilmington metro economy enables more than one million residents of the city
concluded its 10th-consecutive year of expansion in and surrounding counties to live within one mile of a
2019, with an employment growth rate of 0.8% on rail station. In University City, large-scale investment
the creation of 22,500 jobs. The region’s labor force continues with the University of Pennsylvania Health
expanded at a quicker pace, at 2.5 times greater, System’s $1.5 billion patient Pavilion, which is set to
or 2.0%. This was due in part to a rising population, open during the summer of 2021. The 17-story Pavilion
one increasingly buoyed by millennials moving to the will house 500 private patient rooms, 47 operating
city for work. A report in late 2019 by Glassdoor revealed rooms, and a 61-room emergency department.
that Philadelphia was one of the three top U.S. cities for About 1,000 people are working on the Pavilion
job openings, just behind Boston and ahead of Atlanta. project, with 850 construction workers on site. The city
Philadelphia has now experienced 10 years of consistent is beginning to reap the benefits of a number of major
population growth. Immigration is leading the charge startup incubators established in collaboration with
and now accounts for a lion’s share of the population Penn and Drexel Universities, including Pennovation
growth in metros such as Philadelphia, New York, Works and Cambridge Innovation Center’s new office
and Chicago. at 3675 Market. Companies setting up offices in
University City or the Navy Yard to collaborate with local
Center City is a prime driver of Philadelphia’s economy, research institutions include Northern NJ-based Amicus
holding 42% of city jobs. Positioned at the center of a Therapeutics, which opened a 200-person office in
multimodal regional system, including rapid transit lines, University City in late 2019, and San Diego-based cancer
trolley lines, and 29 bus routes, transit brings nearly therapy research firm Iovance Therapeutics, which is
300,000 passengers downtown every weekday. opening a Navy Yard facility in 2021.
Public transit makes downtown density possible and
PHILADELPHIA MSA
EMPLOYMENT / UNEMPLOYMENT
6,133,005 EST.
+0.3% ANNUAL GROWTH
3,007,200
2,984,700
2,959,200
2,922,500
PHILADELPHIA MSA
2,877,300
2,849,600
2,835,700
2,835,300
2,806,300
2,783,800
2,767,400
2,740,400
2,737,700
2020 POPULATION
2,717,500
3,200,000 10.0%
8.0%
2,800,000
6.0%
$74,183 EST.
PHILADELPHIA MSA
2,400,000
4.0% MEDIAN HOUSEHOLD INCOME
2,000,000 2.0%
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19
Total Employed Unemployment Rate 107.5
PHILADELPHIA MSA
Source: Bureau of Labor. All annual figures through December. COST OF LIVING INDEX
U.S. Avg. = 100.0
MARKET INSIGHT REPORT 3
$1,721 RENTAL MARKET
CLASS A AVG. RENT
Asking rent across the Philadelphia metro area advanced by 0.8% during
the fourth quarter of 2019, and was up 4.0% for the year, rising to a new
record high of $1,443. The increase outpaced that of the Northeast (3.1%)
4.5% and the U.S. (3.7%). The run of gains also has now extended to nearly 10
CLASS A AVG.
VACANCY years (39 quarters), in which average asking rent has risen by a total of 41.5%,
or an average of 3.5% annually.
Mean unit prices in 2019 for the metro area were: studios $1,160,
one bedrooms $1,272, two bedrooms $1,589, and three bedrooms $2,384.
Effective rents, which exclude the value of concessions offered to
$1,103 prospective tenants, also climbed 4.0% in 2019 to an average of $1,378.
The declining value of concessions was in correlation to the market’s
CLASS B / C AVG. RENT
increasing competitiveness; overall vacancy retracted 40 basis points YoY to
3.9% by year end. The Center City submarket, the region’s largest and fastest
growing, had a vacancy rate of 7.3% at close of 2019, while its average rent
held a premium of 75% above the metro average, at $2,532.
3.2%
CLASS B / C
AVG. VACANCY The next few years show continued strength in fundamentals for the
Philadelphia metro area, with overall vacancy at 4.3% or below through 2022,
and average asking rent rising 4.0% in 2020 and 3.2% in 2021.
PHILADELPHIA MSA APARTMENT MARKET
ASKING RENT COMPARISON
$4,000 AVERAGE RENT / VACANCY
$1,633
$1,594
$3,000
$1,549
$1,501
$1,443
$2,000 $1,700 8.0%
$1,387
$1,600
$1,312
$1,000
$1,253
$1,500
$1,202
$0
$1,149
$1,400
Studio 1 BR 2 BR 3 BR $1,300 6.0%
Source: Reis, 4Q 2019
$1,200
$1,100
ASKING RENT PSF $1,000
$3.00 $900 4.0%
$800
$2.00 $700
$600
$1.00 $500 2.0%
$0.00
Studio 1 BR 2 BR 3 BR
Average Rent Average Vacancy
Source: Reis, 4Q 2019
Philadelphia Northeast U.S.
Source: Reis, All annual figures year end,*Projected
4 PHILADELPHIA METRO
SUBMARKET
CONSTRUCTION
Philadelphia remains supply constrained, and after a surge to apartment
inventory of 3.5% in 2020 (7,796 units), completed construction volume is
projected to taper off, with only 5,137 units to deliver from 2021-2023.
The cost of living (COL) in Philadelphia remains well-below that of
neighboring metro areas. Philadelphia city COL is 101.2, the New York
metro is 147.5, and Washington D.C. is 152.1. The city’s relative affordability
has enticed investors to rehab housing, build new housing, and open new
businesses. A new report from the National Community Reinvestment
Coalition, a Washington, D.C.-based policy group, has found that from
2000 to 2013, 57 Census tracts in Philadelphia became gentrified, the fourth-
PRESIDENTIAL CITY highest figure in the country during that span, behind only New York,
Los Angeles, and Washington, D.C. In addition to its own vibrant job market,
Post Brothers has lined up a $290 a growing number of regional employers are allowing employees to work
million loan to refinance Presidential from home, so many in-home workers are navigating to the lower-cost
City, a 1,015-unit apartment complex neighborhoods of Philadelphia. Millennials in particular have been drawn
on City Avenue in Philadelphia, to fast-changing neighborhoods such as Fishtown, Kensington, Center City
according to the Business Journal. West, Manayunk, and Northern Liberties, among others.
The 10-year loan carries a fixed-
UNDER PLANNED /
rate of 4.3%. The property is 97.0% SUBMARKET COMPLETED CONSTRUCTION PROPOSED
occupied and Post Brothers invested Center City 1,382 1,932 9,688
$100 million to totally renovate the North / Frankford 411 954 2,458
four-building multifamily property. West Philadelphia 154 415 1,991
The four, 12-story buildings were Roxboro / Chestnut 0 0 267
built during the 1950s. The four- Germantown 0 0 296
year redevelopment completed Olney / Oak Lane 0 0 111
in 2019 and involved re-skinning Torresdale / Bensalem 0 0 780
the façades, reconfiguring space Lower Bucks County 0 0 600
for retail, adding nearly 20,000 Upper / Lower Merion 418 638 1,415
square feet of amenity spaces, Norristown / Plymouth 0 0 1,501
and renovating each unit from top Moreland / Abington 600 0 444
to bottom with luxury amenities. Lansdale / Gwynedd 181 804 280
Also added was the Sora Pool Club Central Chester 0 1,327 1,093
with three pools, grilling stations, Upper Montgomery 12 0 1,747
cabanas, yoga and Zen gardens, a West Chester 0 14 349
fitness center, an outdoor deck, E Delaware County 0 0 142
and tennis courts. W Delaware County 192 0 226
Source: Reis, 4Q 2019, Partial Submarket List, *Completed Construction 3Q 2018 - 4Q 2019
SEMI-ANNUAL REPORT 5
PERMITS
The Philadelphia metro multifamily permit TOTAL RESIDENTIAL BUILDING PERMITS
count for 2019 increased 37% from the previous PHILADELPHIA METRO AREA
year’s total, to 7,384 units. This marked the 18,000
metro’s highest annual total in at least a decade.
16,000
Philadelphia added to existing inventory at a
pace slightly below the Northeast (1.3%) and 14,000
U.S. (1.6%), with a net increase of 1.2% in 2019.
8,038
12,000
The five-year forecast calls for inventory growth
7,108
8,004
10,000
7,781
annualized at 1.2% for Philadelphia, remaining
7,257
7,782
6,987
below the Northeast (1.5%) and U.S. (1.4%). Of the 8,000
5,733
current planned and proposed multifamily units,
6,000 4,912 2,067
30% is condominium, townhouse, or other non
5,715
7,384
4,000
6,523
market-rate rental.
5,540
5,375
5,060
4,463
4,230
3,537
2,000
Reflective of the elevated permit totals,
0
tear-downs are also rising at a rapid pace as '10 '11 '12 '13 '14 '15 '16 '17 '18 '19
redevelopment and investment surge in the Multifamily (5+ Units) Single Family (1-4 Units)
city, seeking to replace obsolescent structures.
Philadelphia real estate developers applied Source: U.S. Census, Multifamily Includes Condos
to tear down more buildings in 2019 than any
other year on recent record, with more than 543
demolition permits issued to private developers PHILADELPHIA MSA APARTMENT MARKET
COMPLETIONS / NET ABSORPTION
in 2019, up from 514 in 2018. City government,
which is charged with tearing down neglected
7,796
structures, requested another 398 permits in
2019, bringing the total to 941. Developers are
6,626
now the primary force for tear-downs, with their
5,156
participation up 255% since 2009.
4,839
4,501
4,300
4,240
4,041
3,952
3,351
Single-family permits for 8,038 homes were
2,731
2,713
issued in 2019, a slight uptick from 2018’s tally.
2,432
2,288
2,135
1,803
The median sold price rose 7.0% YoY from
1,362
1,351
1,046
$256,000 to $275,000, while for-sale inventory
711
plunged 32% YoY. Months supply was a mere 2.1
months, tightening 36% YoY, and showcasing the
region’s constrained supply.
'14 '15 '16 '17 '18 '19 '20* '21* '22* '23*
Completions Net Absorption
Source: Reis. All figures are annual totals. *Projected
6 PHILADELPHIA METRO
AVERAGE SALES
A record number of transactions in 2019 propelled sales volume to $2.67 billion in
the Philadelphia metro, which also set a record-high, rising from $2.52 billion in 2018.
The 110 recorded sales was up from 2018’s tally of 98.
Philadelphia’s sound operating fundamentals and relatively high yields for a supply-
constrained market continues to draw investor interest. Capital continues to flow in
from private equity investors primarily based in the New York City and Washington,
D.C. areas, but also from other top-tier markets around the country. The vast majority of
cap rates were in the range of 5%–6% in 2019 for deals over $5 million, which is above
other coastal cities including New York, the District of Columbia, and Los Angeles,
where cap rates have averaged in the mid-4% range.
New York’s apartment market remains complicated, with comprehensive statewide rent
control measures passed in late 2019. One of the effects of which has been increased
interest in Philadelphia from New York-based investors, or from those who had New
York on their radar. Even prior to the rent control measures, interest from locally-based
investors has been high. CoStar reports that three Lakewood, NJ-based firms have
accounted for 14 major Philadelphia-area acquisitions totaling $800 million since the
beginning of 2016.
PHILADELPHIA MSA AVERAGE SALES PPU / CAP RATE
$196,271
$165,157
$164,253
$157,923
$250,000 9.0%
$131,755
$125,677
8.5%
$102,503
$200,000
$98,206
$95,546
$93,259
$90,089
$90,077
8.0%
$80,315
$79,104
$74,125
$73,067
$71,147
$57,309
$150,000 7.5%
7.0%
$100,000 6.5%
$50,000 6.0%
5.5%
$0 5.0%
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19
$ / Unit Cap Rate
Source: Real Capital Analytics. Based on sales of $2.5 million and greater.MARKET
SEMI-ANNUAL
INSIGHT REPORT 7
APARTMENT SALES TRANSACTIONS
PHILADELPHIA METRO AREA
17,081
16,474
18,000 $3,000
13,794
12,925
12,419
16,000
11,271
10,969 $2,500
10,678
14,000
9,657
12,000 $2,000
8,551
7,527
7,169
10,000
6,180
5,980
$1,500
5,481
8,000
4,026
3,959
6,000 $1,000
1,741
4,000
$500
2,000
0 $0
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19
Total # Units $ Volume (Millions)
Source: Real Capital Analytics. Based on sales of $2.5 million and greater.
GREYSTONE TRANSACTION
ACTIVITY
124 MARKETPLACE APARTMENTS @1220 SHIRT CORNER APARTMENTS
West Chester, PA Philadelphia, PA Philadelphia, PA
Property Type: Mixed-Use Property Type: Student Housing Property Type: Mixed-Use
Number of Units: 92 Number of Units: 300 Number of Units: 63
Sale Price: $29,750,000 Sale Price: $28,141,500 Sale Price: $22,000,000
Price per Unit: $323,370 Price per Unit: $93,805 Price per Unit: $349,206
Sale Date: September, 2019 Sale Date: March, 2019 Sale Date: December, 2019To learn more about Greystone Real Estate Advisors and our capabilities please visit www.greycoadvisors.com KEN WELLAR COREY LONBERGER MARK DUSZAK Managing Partner Managing Partner Director 215.454.2879 215.454.2878 215.454.2884 ken@rittenhouserealty.com corey@rittenhouserealty.com mark@rittenhouserealty.com LUKE DELUCA DOUGLAS EMRICH ROBERT DIPASQUALE Senior Associate Associate Associate 215.454.2852 215.454.2887 215.454.2908 luke@rittenhouserealty.com doug@rittenhouserealty.com robert@rittenhouserealty.com MICHAEL ANDERSON GREYSTONE RRA Associate 107 South 2nd Street, 4th Floor 267.323.4088 Philadelphia, PA 19106 mike@rittenhouseaffordable.com www.rittenhouserealty.com Sources: Greystone; Reis; RealCapitalAnalytics; CoStar; U.S. Census; Bureau of Labor; Censusreporter.org; Philadelphia magazine; The Philadelphia Inquirer; GlobeSt; Plan Philly; Long & Foster; Philadelphia Business Journal; Brookings Institution Copyright ©2020 Greystone & Co. II LLC. All Rights Reserved. References to the term “Greystone,” refer to Greystone & Co. II LLC and/or its affiliated companies, as applicable. Although the information contained herein has been obtained from sources deemed reliable, Greystone Real Estate Advisors, Inc. makes no express or implied guaranty, warranty, or representation that the information is complete or accurate. Further, any projections, opinions, assumptions, or estimates used or offered herein are for the purpose of example only. Accordingly, Greystone Real Estate Advisors, Inc. recommends that you conduct your own careful, independent investigation into all aspects of this research report in order to gain a full understanding of the program / topic and reach your own conclusions or opinions as to its value and any related issues. The information contained in this research report should be independently examined by experts selected by you. Any recipient of these materials from Greystone Real Estate Advisors, Inc. should not and may not rely on these materials for any purpose beyond general introductory information.
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