MARKET SNAPSHOT
The Philadelphia metro area is experiencing a sharp downturn in multifamily development, with new starts, units under construction, and completions all trending significantly below historical averages. In 2024, multifamily starts plummeted from 7,445 units in 2023 to just 4,705 units, marking a decrease of 2,740 units or -36.8%. This is in stark contrast to the 10-year historical annual average of 8,050 units. Similarly, units under construction remain below past trends, with 11,288 units underway as of year-end 2024—17.2% lower than the 10-year average of 13,634 units.
Looking ahead, unit completions are projected to drop significantly in 2025, falling from just over 13,000 units in 2024 to a volume just shy of 5,300 units, a steep 60% decline compared to the historical annual completion average of 7,582 units. Submarket-level data further underscores this slowdown, with several areas across the metro expecting no new deliveries in 2025. On the contrary, North Philadelphia will lead with 753 forecasted deliveries, followed by South Philadelphia/Navy Yard (860 units) and Art Museum/Northern Liberties (873 units).
Philadelphia’s average occupancy declined slightly to 94.1% in Q4 2024, down 30 basis points year-over-year. This trend is expected to continue into 2025, with occupancy projected to dip to 93.9% by year-end, reflecting a forecasted annual decline of 40 basis points as new supply enters the market and demand adjusts. While most submarkets will experience only slight occupancy declines, some areas will remain resilient. Lower Gloucester County (97.2%), Central Bucks County (96.6%), and Lower Burlington County (96.7%) are projected to maintain high occupancy levels due to limited new construction and strong demand.
However, submarkets with larger completions or weaker demand are expected to see more significant declines. Despite these submarket variations, the overall market remains stable, with Philadelphia’s metro-wide occupancy expected to hold above 93% through 2025.
Philadelphia’s apartment market experienced moderate rent growth in 2024, with Q4 effective rents reaching $1,762, reflecting a 1.8% year-over-year increase. In 2025, rent growth is expected to accelerate, reaching $1,815 by Q4, with the strongest gains occurring in the second half of the year.
Suburban submarkets are forecasted to outperform urban neighborhoods over the near term, with Cherry Hill/Haddonfield, Main Line, and Horsham/Willow Grove leading rent growth at or above 4.0% year-over-year due to relative affordability and strong demand. Urban areas, including Center City and University City will see steady but more moderate rent increases around 3.0%, as affordability pressures may limit more aggressive price hikes by landlords. It ais also likely that workforce and mid-tier housing assets in Lower Burlington (+3.2%) and Upper New Castle (+3.0%) will continue to attract renters, ensuring stable rent growth. Ultimately, limited new supply in key submarkets will also contribute to sustained price appreciation throughout 2025.
12-month period ending November 2024
Philadelphia continues to showcase resilience and economic stability, driven by diversified industry growth and strategic investments. In 2025, job growth is projected at 0.8%, adding 23,400 new positions, with Professional & Business Services leading expansion through the decade.
As corporate investments and infrastructure projects fuel economic growth, Philadelphia remains a prime market for multifamily investment, supported by rising employment, expanding industry clusters, and a competitive cost of living. The Port of Philadelphia’s 15-year expansion plan is set to create 9,000 jobs and generate billions in new business revenue, further reinforcing regional growth. Additionally, the new state-of-the-art manufacturing facility at Springhouse Innovation Park strengthens Philadelphia’s leadership in life sciences and advanced manufacturing, ranking it No. 8 nationally in Life Sciences, surpassing New York City as an innovation hub.
With a slowdown in new multifamily supply entering the market, rent growth is expected to reach 3.0% by the final quarter of 2025, supported by Philadelphia’s dynamic and robust economy.
Disclaimer: This multifamily forecast incorporates data from reputable third-party sources, including Costar, Yardi Matrix, the U.S. Census Bureau, the U.S. Bureau of Labor Statistics, and ESRI. While we make every effort to ensure accuracy, we cannot guarantee the reliability of the projections provided. Forecasts are inherently subject to change due to evolving market conditions, economic factors, and unforeseen events. We strongly encourage users to conduct independent due diligence and consult with an MMG Advisor before making any investment decisions based on this information.
