4 — July 2025 — Commercial Brokerage Directory — M id A tlantic Real Estate Journal
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Prepared by Marcus Lisse, research analyst for Greater Philadelphia at Newmark Newmark’s Greater Philadelphia Multifamily Market Overview arket Observations Rent Growth - The Greater Phil- In 2024, the Greater Philadelphia market saw 9,972 units delivered, a 15% increase in deliveries since 2023. Among the 2024 deliveries, 73.4% of the inventory was delivered in Philadelphia. This quarter saw a total of 2,219 units delivered, with 1,374 units (61.9%) being delivered in Philadelphia. Near-term deliveries are projected to stabilize in the wake of this “higher -than- average” delivery period. It is projected that deliveries will decline by an average of -15.6% year-over-year from 2025 to 2029. Declines in deliveries over the next few years, coupled with the below-average construction starts this quarter, suggest less competition in the market for newly developed, high-end space. The Philadelphia Metro Experiences Highest Number Of Deliveries In Recent History Annual Deliveries (Units) 12,000 Real Page’s Forecasts Annual Deliveries (Units)
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inventory has increased by 220 basis points. Philly’s Residential Tax Abatement Sunset Spurred An influx of apartment deliv - eries is temporarily weighing on fundamentals in Philadelphia. The new supply is tied back to the surge in 5+ unit multifamily permits filed at the end of 2021, as developers rushed to take advantage of a tax abatement prior to its phased expiration. Changes to the City of Philadelphia’s Tax Code • The Philadelphia residen - tial tax abatement was a sig- nificant factor in stimulating new real estate development across the city for decades. Ini- tially implemented in the late 1990s, this policy offered a 10- year tax break on the increased value of a newly constructed property or one that had under- gone significant improvements. • In 2020, Philadelphia did not entirely end its residential tax abatement but revised it. The modification began im - pacting projects with permits filed in 2022 and beyond. Recent Runup in New Supply Prior to this change, proj - ects benefited from a 100% tax exemption on the increase in property value resulting from construction for a pe- riod 10 years. The current structure phases out this exemption by 10% annually over a 10-year period. Start- ing with projects filed in 2022, the full exemption gradually decreases, reaching 0% in the eleventh year. • The changes to the tax code accelerated some recent deliver- ies, but market players expect new supply to temper after 2025 in Philadelphia. MAREJ
adelphia region demonstrated a positive 2.4% year-over-year rent growth. Submarket growth within the region ranged from 0.9% to 5.8%. - Southern New Jersey has experienced the strongest five-year average rent growth, with Gloucester County and Burlington County growing on average 7.6% and 6.5%, respectively. - Rent growth in the Greater Philadelphia market is ex- pected to grow by an average of 3.3% over the next two years. Sales Volume - Following record-breaking multifamily sales volumes in 2021 and 2022, activity in the Greater Philadelphia market has moderated. Despite this overall slowdown, 2024 saw a significant uptick, with approx - imately $2.6 billion in sales volume—a 130.3% increase compared to the previous year. The market’s momentum has continued into 2025, with the first quarter alone recording $314 million in transactions, representing a robust 46.1% gain over the first quarter of last year. - A few of the most nota- ble deals transacted include Pantzer Properties’ pur- chase of Ember at Berwyn for $386,000/unit, Harbor Groups’ acquisition of The Gables for $248,485/unit, and Equus Capital Partners’ investment in Jacob Woods for $317,935/unit. High-quality transactions such as these re- flect a healthy investor market in the Greater Philadelphia region. All three transactions above were expertly man- aged by Erin Miller, Chris Koehle r, and Marybeth Farris of Newmark. Market Demand Drivers - Greater Philadelphia’s mul- tifamily occupancy rate was 96.0% as of the first quarter of 2025. This high occupancy rate can be attributed to a combi- nation of strong employment growth, sustained high interest rates, and a challenging market for single-family homebuyers. - Philadelphia distinguishes itself among major U.S. cities with a compelling balance be- tween cost of living and income. In 2024, the city reported an av - erage annual salary of $80,540 and a cost-of-living index of 102.1, translating to an an - nual living cost of $30,606. This
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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Philadelphia Outer Market
Sorce: Newmark Research, Real Page
Source: Newmark Research, Real Page
The Philadelphia Metro Experiences Highest Number Of Deliveries In Recent History
results in a purchasing power of $78,895, $7,395 above the national average. Compared to cities like NY, where the cost- of-living index reaches 168.9 and annual expenses exceed $50,600, Philadelphia offers a more af- fordable lifestyle. With a salary- to-cost-of-living ratio of 2.63, residents enjoy a comfortable standard of living free from the financial pressures common in other cities around the country. New Inventory - Office-to-residential conver - sions are becoming increasingly popular in the market. Greater Philadelphia has a few projects currently underway. The office building at 400 Market Street is undergoing a transformation, with floors 2 through 12 be- ing converted into 176 modern apartments. Newmark’s Jim Badolato and Steve Comly arranged the financing. This redevelopment project is scheduled for completion by the third quarter of 2026. The renovation of Six Penn Center is underway, converting the 240,000 s/f building into 299 apartments and is expected to be completed in the third quar- ter 2025. The Three Parkway conversion is underway for 175 residential units from the 9th floor down. Ten Penn Center also has a planned partial conversion from the 14th floor upward.
units broke ground in the region, 84.2% lower than the 5-year his- torical average for first-quarter construction starts. The Philadelphia Metro Experiences Highest Number Of Deliveries In Recent History In 2024, the Greater Phila - delphia market saw 9,972 units delivered, a 15% increase in deliveries since 2023. Among the 2024 deliveries, 73.4% of the inventory was delivered in Philadelphia. This quarter saw a total of 2,219 units delivered, with 1,374 units (61.9%) being delivered in Philadelphia. Near- term deliveries are projected to stabilize in the wake of this “higher-than-average” delivery period. It is projected that deliv- eries will decline by an average of -15.6% year-over-year from 2025 to 2029. Declines in deliv- eries over the next few years, coupled with the below-average construction starts this quarter, suggest less competition in the market for newly developed, high-end space. Multifamily Demand Keeps Pace With Surge In Supply In 2024, quarterly absorption reached 8,504 units, the highest level since 2021. Philadelphia notably contributed 6,377 units, marking the largest annual ab- sorption in recent history. This quarter continued the strong absorption trends, with 2,739 units of positive absorption overall, including 1,249 units in Philadelphia. Forecasts align with delivery trends, predict - ing an average of 5,455 units of positive absorption per year over the next five years. Philadelphia Market Forecasted For Strong Rent Growth And Occupancy Gains In the first quarter, rents in
Philadelphia increased by 175 basis points year-over-year, while the overall market saw an annual increase of 241 ba- sis points. Over the next five years, the city of Philadelphia is projected to experience an average annual growth of 190 basis points in rent and an aver- age annual growth of 13 basis points in occupancy rates. Pro- jections for growth reflect stable demand for multifamily space in both the city of Philadelphia and the Philadelphia metro. Renting Remains The Most Affordable Option In Greater Philadelphia Between 2015 and 2023, me - dian monthly housing costs for Greater Philadelphia renters rose 44.3%, compared to 20.7% for homeowners. Despite this, the cost of renting remains more affordable than owning a home in the Philadelphia metro. The combination of affordability and new supply has increased the proportion of renters in the housing market. Since 2010, the share of rental units within the market’s total housing NEWMARK 4
An influx of apartment deliveries is temporarily weighing on fundamentals in Philadelphia. The new supply is tied back to the surge in 5+ unit multifamily permits filed at the end of 2021, as developers rushed to take advantage of a tax abatement prior to its phased expiration. Philly’s Residential Tax Abatement Sunset Spurred Recent Runup in New Supply
Changes to the City of Philadelphia's Tax Code
Forecasted Philadelphia Market YOY Apartment Supply Growth
3.5%
• The Philadelphia residential tax abatement was a significant factor in stimulating new real estate development across the city for decades. Initially implemented in the late 1990s, this policy offered a 10-year tax break on the increased value of a newly constructed property or one that had undergone significant improvements.. • In 2020, Philadelphia did not entirely end its residential tax abatement but revised it. The modification began impacting projects with permits filed in 2022 and beyond. Prior to this change, projects benefited from a 100% tax exemption on the increase in property value resulting from construction for a period 10 years. The current structure phases out this exemption by 10% annually over a 10-year period. Starting with projects filed in 2022, the full exemption gradually decreases, reaching 0% in the eleventh year. • The changes to the tax code accelerated some recent deliveries, but market players expect new supply to temper after 2025 in the city of Philadelphia. - There are currently 31,236 units under construction in the Greater Philadelphia market, about 7.4% of the current inven- tory. Among all submarkets, Northeast Philadelphia has the largest construction pipeline with 10,246 units under con - struction, nearly a quarter of its current inventory. Recent trends have shown that construction starts have fallen compared to the numbers from 2021-2022. In the first quarter of 2025, 461
Green Street’s Baseline Forecasts
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2.5%
Philadelphia’s tax abatement sunset begins in 2022.
2.0%
1.5%
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0.5%
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Source: Newmark Research, Green Street
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