Better economy helps region's apartment market

HOLLY FARRANT / Charlotte Observer
HOLLY FARRANT / Charlotte Observer
Posted: April 25, 2013

"Modest" economic growth will benefit the Philadelphia region's apartment market during the rest of 2013, with vacancy rates falling and effective rents rising, real estate brokerage Marcus & Millichap said Tuesday.

Developers will add 2,000 rental apartments to the market, almost doubling the 1,031 completed in 2012, the report said. Building permits for multifamily housing, a measure of future growth, will rise by 5 percent to 3,900, comprising both condominiums for sale and rental units.

(Last week, the U.S. Commerce Department reported that a 31.1 percent jump in apartment construction nationwide in March helped set new-home building on its fastest pace since June 2008.)

There will be two sources of renters for the region's market this year, Marcus & Millichap said. One results from increased employment: 36,800 workers have been added, expanding local payrolls 1.3 percent. The other source results from pent-up demand by young adults who have been living at home and are not ready to buy, Marcus & Millichap said.

Center City will remain a focus for developers of luxury rentals, with many targeted to affluent buyers moving from the suburbs or seeking weekend getaways or pieds-à-terre.

Vacancy rates will decline to 4.8 percent regionwide, from 5.2 percent, after remaining flat in 2012. As a result, average effective rents will rise 2.1 percent in 2013, to $1,122 a month, the report said.

With prospects for higher returns so good, investor demand remains high, Marcus & Millichap said.

Sales volume of apartment buildings was lower in the first quarter than in fourth as owners acted to avoid changes in capital-gains taxes.

With that behind them and "ongoing efforts to provide guidance on property taxes from the City of Philadelphia," Marcus & Millichap said, it expects a higher volume of deals this year.


Contact Alan J. Heavens

at 215-854-2472, aheavens@phillynews.com, or @alheavens at Twitter.

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