The Philadelphia metro area’s stabilized vacancy rate* stands at 4.9% — 1.4% higher than the 3.5% rate registered at this time last year. Vacancy increased over the year in Suburban Pennsylvania, Southern New Jersey, and Philadelphia City. Suburban Pennsylvania vacancy is up .5 basis points compared with June 2013, at 4.5%. Vacancy in Southern New Jersey, at 5.7%, rose by 2.2% from 3.5% at June 2013. Vacancy in Center City is up 2.5% to 5.0% in the same time period.

The sub-state areas of Southern New Jersey and Suburban Pennsylvania experienced differing rent conditions; with an overall rent growth being flat at 0.0% over the year with average effective rents** at $1,447. The rents in Philadelphia City did not fair well, with a decrease of 1.6% since last year at this time. Rent growth in Suburban Pennsylvania was the best as they grew by 0.1% over the same period. Effective rents across the entire Philadelphia metro area decreased by 0.5% over the past year.

For the metro as a whole, average effective rental rates are $1,667 ($1.67 per SF). Center City effective rents average $2,141 ($2.24 per SF) vs. $1,447 ($1.42 per SF) in the suburbs.

Philadelphia City

An increase in supply over recent quarters has led to rent declines and rising vacancy in Philadelphia. The number of units under construction has risen slightly, and as a result, we project that the 36-month supply will slightly exceed the number of units that will be absorbed*** in and around Center City by the end of our 36-month forecast period. This can already be seen by the rising vacancy rates in the last quarter. There are currently about 5,025 units under construction or planned that may deliver in the next 36 months in the Center City area. Philadelphia’s supply/demand relationship indicates that vacancy will continue to edge up slightly and rent growth is likely to stay negative over the next 24 months. This trend will be temporary, however, and we expect the Center City area to remain a healthy market.

Suburban Pennsylvania

Effective rents in Suburban Pennsylvania are up by 0.1% when compared with rents at June 2013. Stabilized vacancy is currently 4.5% compared with last year’s level of 4.0%. Concessions have dropped slightly over the last year, from 1.3% of asking rent at June 2013 to 0.4% in the current quarter. Effective rents in Montgomery County are down 0.7% over the year, while Chester and Delaware counties experienced positive growth of 1.4%. Bucks County experienced a decline over the year of 1.6%. Stabilized vacancy is currently the highest in Delaware and Chester Counties at 4.7%. Stabilized vacancy in Bucks County is 3.9%, and 4.6% in Montgomery County at June 2014.

Southern New Jersey

Mercer County currently has the lowest stabilized vacancy rate in Southern New Jersey, at 3.5%, up from 1.7% at mid-year 2014. Camden County has a stabilized rate of 7.4%, and Burlington County has a rate of 4.2%. Camden County’s stabilized vacancy rate increased by 390 basis points compared to June 2013 while Burlington County increased by 70 basis points during the same time. Excluding Mercer County, the vacancy rate for stabilized properties in Southern New Jersey rose by 2.2%, from 3.5% at second quarter 2013 to 5.7% currently.

*The term stabilized vacancy rate in real estate refers to the rate of available units in stabilized properties. A property is considered stabilized when it reaches 95% capacity. The property is still considered in the pool of stabilized properties even if it drops below 95% capacity afterwards.

**Effective rent denotes the total cost of rent after concessions (perks such as a month free of rent, etc) have been made to the renter by the landlord

***The rate at which available homes are sold in a specific real estate market during a given time period.