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2018 will be full of ribbon-cuttings. Is 2019 the start of a lull or a pause before the boom continues? Capital markets, local tax policy, and job growth will dictate.

• Get out the over-sized scissors: before 2018 is out, the entire office pipeline (more than 2.5 million square feet of new inventory), at least 2,000 apartments, 600 hotel rooms, and around 500,000 square feet of retail will welcome their first users. Philadelphians have become accustomed to a crane-dotted skyline, so it’s easy to assume this is the new normal, but the future is less certain than current conditions would indicate. A lull is fast approaching.

• 2019 will be a bigger year for hotels, due in part to construction delays (W/Element) but also to sustained investor interest in the market (Pod Hotel). Every other asset class drops off: office construction will not continue speculatively, leaving major projects seeking large tenants (Schuylkill Yards, 1301 Market). Multifamily performance has been strong enough to get late-arriving projects into construction (The Harper, Riverwalk), but the status of other proposals, such as 1911 Walnut or the Piazza’s final phase, remain far less certain.

• The markets will be paying close attention to leasing velocity, absorption, and rents before injecting more
capital, particularly on the office side where organic growth and arrivals of new tenants are critical. Uncertainty around new real estate taxes and assessments will also complicate underwriting until a clearer path forward
is established. 

Source: JLL Research

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