16C — June 22 - July 12, 2018 — Mid-Year Review — M id A tlantic
Real Estate Journal
By Carlo L. Batts, MAI, Rittenhouse Appraisals Philadelphia market remains the most affordable option
he strength and pace of development in the multifamily mar-
laws, the forecast is positive heading into 2019. A Robust Multifamily Market Will Continue Residential growth has been strong, primarily near high-traffic corridors with dense commercial devel- opment. West Washington Avenue, Girard Avenue in Northern Liberties and East Falls are clearly taking shape as popular areas. Overall, the apartment market continues to hold its ground even as new apartment deliveries have remained near a 30-
year high for more than 36 months. However, the city’s va- cancy rate is rising, and rent growth, which is already barely keeping pace with inflation, is decelerating. Expect this trend to persist throughout the second half of 2018, and into 2019. Though supply growth is likely to remain near record highs into 2019, local employment growth is slowing, and the city’s millennial cohort is maturing past the traditional renting years.
Apartment communities that offer spacious units, along with access to good schools and ample park- ing within low-crime areas should perform best amid these changing tides. De- velopers may begin to favor condos over apartments, and look for infill residential de- velopment to increase. Commercial Develop- ment Plays Catch Up The expansion of the resi- dential market has increased the demand for services. Commercial activity will
have to catch up at some point, bringing new develop- ment. One possibility is a grocery store on Washington Avenue as development along the in- dustrial corridor continues to remake that portion of South Philadelphia. University City will begin to take on a new identity as development moves beyond student hous- ing, spurred by growth of the Cambridge Innovation Cen- ter (CIC), which is expected to attract more retail. King of Prussia will cap- ture more growth and de- velopment demand than other suburban centers and become more of a 24-hour destination. Comcast Center Could Start a Trend A top 10 office landscape by square footage, the Phila- delphia metro area has some of the lowest vacancy of any major market in the country. Among major Northeast and Mid-Atlantic office markets, only Boston boasted a tighter vacancy rate than Philadel- phia’s 9 percent as of the second quarter of 2018. Year-over-year rent growth has risen to 2.6 percent, lead- ing some to believe there will be more development. The completion of the Comcast Technology Center could spark a trend, as other de- velopers will find value in the market. Capital and interest rates factor It appears that the market is moving forward despite the city’s tax policies. However, an external factor could be a wild card. Interest rate in- creases will begin to influence development trends and refi- nancing, as investor returns could be impacted. This will cloud the financ- ing and equity matrix. It could work in concert with the real estate tax environ- ment to bring uncertainty later in the year. However, the Philadelphia market remains the most affordable option in the middle of higher priced primary economic cen- ters. And because of that, it is most likely that the region will continue plugging along. Carlo L. Batts, MAI is the principal of Ritten- house Appraisals.
ket during the first six months o f 2 0 1 8 w i l l play a ma- jor role in the growth of other seg- ments dur- ing the sec-
Carlo L. Batts
ond half of the year. Though the overall market could be influenced by inventory, ac- cess to capital and local tax
Commercial • Multifamily • Retail • Industrial 267–314–8635 www.rhappraisals.com PA-NJ-DE
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