Philadelphia Apartment Sector on Track to Recover

The Philadelphia apartment market is expected to continue to face challenges operationally through year end, although a decline in construction activity and deceleration in job cuts may help slow vacancy increases in quarters ahead, according to a fourth-quarter Apartment Research Report by Marcus & Millichap. Metrowide multi-family rental stock has expanded by just 0.6 percent since the beginning of the year, and there are only about 1,100 units under way.

"Investor interest will likely gain momentum into next year as signs of a recovery become clearer," says Spencer Yablon, regional manager of the Philadelphia office of Marcus & Millichap.

Following are some of the most significant aspects of the Philadelphia Apartment Research Report:

- Total employment in the metro area is expected to decrease by 2.8 percent, or 80,000 jobs, this year, as cuts in the manufacturing and trade, transportation and utilities sectors persist. In 2008, 46,100 jobs were removed from the market.

- A year after builders delivered 1,300 apartment units, 500 units will be added to the Philadelphia market in 2009. Completions will expand rental inventory 0.3 percent, compared with supply growth of 0.7 percent last year.

- Despite a significant slowdown in construction activity this year, softer renter demand due to job losses will push vacancy higher. By year end, vacancy is forecast to reach 6.5 percent, up from 5.7 percent at the close of 2008.

- In 2009, asking rents are expected to decline 1.1 percent to $1,012 per month, while effective rents are projected to fall 2.4 percent to $960 per month.

- Asking and effective rents gained 2.2 percent and 2.1 percent, respectively, last year.
For a copy of the complete Philadelphia Apartment Research Report, as well as reports on other markets nationwide, visit www.MarcusMillichap.com.