Newmark’s Greater Philadelphia Multifamily Market Overview

Prepared by Marcus Lisse, research analyst for Greater Philadelphia at Newmark

Market Observations Rent Growth

- The Greater Philadelphia 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 expected 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 approximately $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 notable deals transacted include Pantzer Properties’ purchase 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 reflect a healthy investor market in the Greater Philadelphia region. All three transactions above were expertly managed by Erin Miller, Chris Koehler, and Marybeth Farris of Newmark.

Market Demand Drivers

- Greater Philadelphia’s multifamily occupancy rate was 96.0% as of the first quarter of 2025. This high occupancy rate can be attributed to a combination 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 between cost of living and income. In 2024, the city reported an average annual salary of $80,540 and a cost-of-living index of 102.1, translating to an annual living cost of $30,606. This 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 affordable 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 conversions 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 being 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 quarter 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.

- There are currently 31,236 units under construction in the Greater Philadelphia market, about 7.4% of the current inventory. Among all submarkets, Northeast Philadelphia has the largest construction pipeline with 10,246 units under construction, 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 units broke ground in the region, 84.2% lower than the 5-year historical average for first-quarter construction starts.

The Philadelphia Metro Experiences Highest Number Of Deliveries In Recent History

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.

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 absorption 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, predicting 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 basis 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 average annual growth of 13 basis points in occupancy rates. Projections 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, median 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 inventory has increased by 220 basis points.

Philly’s Residential Tax Abatement Sunset Spurred Recent Runup in New Supply

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.

Changes to the City of Philadelphia’s Tax Code

• 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 Philadelphia.