Multifamily construction will increase in the MSA during 2004, with 2,500 new units forecast to be delivered. While that is heavier than the 1,700 units completed in 2003, Jeffrey Algatt, regional manager of M&M's local office, says, the increase is "not excessive given the size of the metro area."
Center City posted a multifamily vacancy rate above the regional average in third quarter 2003, at 4.9%. More expensive, class A units in Center City bore the brunt of the increase, with vacancy at 6.3%, while class B and class C units had a combined vacancy rate of 2.8%, according to the report.
Speaking of the full MSA, Algatt says, "a larger increase in vacancy was expected, but demand has proven to be more resilient than anticipated."
Effective rent growth in the MSA, minus concessions, is expected to rise 2.8% by the end of this year to reach an average of $842 a month. That is up from an average of $819 a month last year. Center City rent growth was the strongest of the submarkets this year, posting a third-quarter average asking rate of $1,320 a month.
Owners of class A units in Center City were asking an average of $1,555 a month, Algatt reports. Although Center City rents are the highest in the region, he notes, "they still compare favorably with rents in other cities, such as New York and Chicago. Overall, rent growth is expected to remain strong over the next several years, exceeding 3% annually," the M&M report concludes.
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