The surging number of rental apartment projects in and around Center City will likely result in a surplus that lifts vacancies and lowers rents, according to a report released Thursday by the Center City District business-improvement group.
A total of 3,127 new units are scheduled for delivery this year in an area largely bounded by Girard Avenue to the north and Tasker Street to the south, between the Schuylkill and the Delaware River, the report’s authors said.
That’s a 71 percent increase over 2016 levels and nearly three times the average annual increase in new apartment units tracked by the Center City District (CCD) between 2010 and 2016, the report said.
Though central Philadelphia’s career opportunities, cultural offerings, and other assets have been drawing ever more new residents, that part of the city faces headwinds that could keep population growth from keeping pace with new apartment supply, the authors wrote.
“Philadelphia’s slow job growth and the uncertainties surrounding public school funding tend to limit our ability to maximize [the city’s] competitive strengths,” they said. “There will likely be some excess supply of rental units that will cause rents to moderate, leasing to take a little longer, and vacancy rates to rise in some existing apartment buildings.”
New apartment projects due for completion this year include PMC Property Group’s 360-unit One Franklin Tower at 200 N. 16th St. and the 339-unit Hanover North Broad development by Parkway Corp. and Houston-based Hanover Co. at 322 and 339 N. Broad St. at Callowhill Street, according to the report.
There is some sign that developers are starting to rethink their plans for apartments in the city because of the jump in inventory. Jersey City-based Mack Cali Realty Corp. said last summer that it had backed out of a deal with Parkway Corp. to build a 300-unit apartment tower at 709 Chestnut St., citing an expected softening in rent growth.
Including the 3,127 new rental units expected this year, the CCD report tallies 5,379 apartments, condominiums, and single-family homes in progress or due for completion by the end of 2018.
Since 2000, the group said, 20,705 units of all kinds of housing have been added to the area it calls Greater Center City, corresponding to a 19 percent increase in population to almost 190,000, the group said.
In 2016, a record 2,506 new residential units were completed, surpassing the previous high of 2,168 units in 2013, the CCD said.