Hard to find a bargain: Class B asking rents have surged across the Philadelphia region
Rent growth has been a hallmark of this market cycle in many submarkets throughout Greater Philadelphia.
February 25, 2019
- Rent growth has been a hallmark of this market cycle in many submarkets throughout Greater Philadelphia, but in many cases, the steepest climbs have been in historically lower-rent product: on a regional level, Class B rents have grown an average 14.0 percent since 2013, whereas overall asking rents have grown 10.9 percent. In the eight submarkets presented here, Class B rent growth has exceeded 14 percent, approaching 30 percent in Voorhees and exceeding 27 percent in Market East. On an annualized basis, this equates to 5.3 and 5.0 percent growth, respectively.
- The list of fastest-growing submarkets for Class B rents reveals that the phenomenon is not limited to the highest-profile locations, with areas of South Jersey, the PA suburbs, and the CBD all seeing the upswing. Reasons for these above-average increases differ: in several submarkets, investors have opted to reposition Class B assets in lieu of building new or making more marginal improvements to Class A product. In places like University City, the arrival of new Trophy and Class A office has produced a rising tide on which all buildings are riding (this is also true to some degree in Cherry Hill, where new construction in Camden has helped justify higher rates). In other cases, it is simply a matter of availability: asking rents are derived only from spaces on the market in any given quarter, so the quality of what’s available can play a major role.
Source: JLL Research