Review: Pennsylvania

The Pennsylvania markets are among the newer additions to our expanded coverage in 2016. Dominated by the Philadelphia and Pittsburgh markets, we are tracking almost 500,000 units in about 4000 properties. Straddling the mid-west and eastern seaboard, like other markets in those regions, Pennsylvania multifamily was dominated by smaller ‘walk-up’ type apartment buildings. Recently though, we are seeing more conventional garden style communities as well as the continuing shift to mixed-use mid-rises and hi-rises in the last 15 years. Submarkets in the Pennsylvania markets are some of the most diverse we cover, from urban cores to resort towns, to rural towns and hamlets in the outer regions. Here’s a brief look at the greater Philadelphia and Pittsburgh areas.

Overall, we are tracking over 2200 properties in the greater Philadelphia area with more than 356,000 units. Of those, just over 300,000 units in about 1600 properties are considered conventional. We have demarcated 27 submarkets ranging from the eastern seaboard of New Jersey in the east to Harrisburg in the west. Prices vary widely, with effective rents at $2.56 per square foot in the urban center of Philadelphia – almost twice as expensive as many of the other submarkets. New Construction, though, is driving down average occupancy in those urban centers. Both lower North and South Philly submarkets have average occupancies well south of 90%.

In Pittsburgh we are tracking more than 900 properties with more than 80,000 units. At an average of only 90 units per property, Pittsburgh has one of the highest concentrations of small communities in the markets we cover. Only about 400 properties with around 54,000 units are in communities that are considered conventional with more than 50 units. Pittsburgh is divided into 12 submarkets stretching from just across the Ohio border in the west to Westmoreland County in the east. Average occupancy for all the submarkets is 91.0% but like many of the metro area these days, new construction is pushing average occupancy in the urban core submarkets into the 80’s range. Average effective rent per square foot is $1.16 throughout the region but is $1.69 in the central Pittsburgh area.

Even as the inner submarkets are reaching peak pricing levels and occupancy rates are declining, outlying regions are still seeing solid occupancy numbers and rent gains. The next few quarters, however, may see competition spread out from the urban cores to the outlying submarkets as their prices increase.