Multifamily Vacancies Rise Short-Term, Drop in 2004

PHILADELPHIA-The vacancy rate is rising in the greater Philadelphia multifamily market, but remains two full percentage points below the national average, according to an apartment research report from the local office of Marcus & Millichap. Overall vacancy in this market was 3.3% at year-end 2002, and “will peak near 5% in the latter half of 2003,” says Jeffrey R. Algatt, regional manager of the M&M office.

Overall, “the fundamentals remain solid,” he says and expects job growth later this year to increase demand for rental units. “Philadelphia will still be among the better-situated markets in the nation,” he adds.

Effective rents are forecast to increase 2.4% this year, rising from an average of $819 per month in 2002 to $839 a month by the end of this year. Center City rents are the highest in the market. At mid-year, the average effective rent was $1,267 per month, and Algatt expects it to rise to $1,284 a month by year-end.

Throughout the MSA, 1,700 units will come online this year. One of the largest is St. James Court, a 309-unit, 45-story tower in Center City at the corner of Walnut Street and Washington Square. It will contain some office and retail space.

Speaking of the overall market, including the suburbs, Algatt says, “rent growth is expected to be strong for the next several years, exceeding 3% each year. Concessions are not being offered at most properties with vacancy below 7%.”