Philly Rides Hot Residential Real Estate Market Into 2016
Population growth and low cost of living have driven an unprecedented boom in Philadelphia’s residential real estate market over the last two years, drawing national interest from investors and developers that experts say should continue unabated in 2016.
As new development dollars continue to pour into the City of Brotherly Love, real estate lawyers say that both an uptick in population and a low cost of living compared with neighboring New York City and Washington, D.C., will continue to ensure continued demand for multifamily housing in the coming year.
“Philadelphia wasn’t always mentioned as a place that was a hot market or a place to invest,” Ballard Spahr LLP real estate chair Bart Mellits said. “People didn’t think there was enough juice in the market, but now I think people are seeing the value here. This is a walkable city with a lot to offer.”
The fundamental shift the Philadelphia real estate market has experienced as it recovered from the financial crisis in 2008, attorneys said, was a realization by national players about the growth opportunity the city presented.
“This was a parochial market,” Cozen O’Connor senior counsel Howard Grossman said. “Everything was owner-driven, with small groups of owners trading back and forth on a lot of development.”
Helping to cement Philadelphia’s status over the years as a secondary market was its declining population.
The city’s population peaked at just over 2 million in the 1950s, according to U.S. census figures before declining by nearly 500,000 residents over the next half-century.
After bottoming out in the 2000 census at just under 1.52 million residents, the trend began to reverse. The population showed a half-percent uptick in the 2010 census, and an estimated 2.2 percent bump in 2014 to 1.56 million residents.
Mellits said that retaining millennials from the city’s universities had been instrumental in driving population growth and the subsequent residential real estate boom.
“Keeping the millennials in town and attracting them to town has been a big driver,” he said. “What that means is that people need to live somewhere, and clearly the multifamily sector is the strongest sector of the real estate economy.”
Helping to meet the new demand in the city has been an influx of developers and investors from around the country including the Nashville-based Southern Land Co., and the Hanover Co. and Hines Interests LP out of Houston.
While major development projects have typically been confined to Center City, Klehr Harrison Harvey Branzburg LLP zoning and land-use chair Carl Primavera said that the recent boom has also spurred activity in historically less obvious parts of the city including Northern Liberties, Fishtown, South Philadelphia, and University City.
“There were areas that were off the radar that are now super hot,” he said. “It’s pushing out in every way, shape, and form.”
A particularly hot market has been University City, a neighborhood in West Philadelphia that’s home to the University of Pennsylvania, Drexel University, and the University of the Sciences.
Mellits said that his firm had helped to represent Southern Land in connection with the 3601 Market project, a 28-story luxury apartment tower in West Philadelphia that recently opened its doors as part of a massive expansion of the University City Science Center.
Helping to drive the demand for residential development in University City has been the explosive growth in educational, research, and health care facilities in the neighborhood.
The UC Science Center, a research park that opened in the neighborhood in the 1960s, is in the midst of a joint venture with Wexford Science & Technology LLC that, with representation from Cozen, would see new offices and laboratories plus residential and retail spaces between 34th and 38th streets in West Philadelphia.
Grossman, whose firm is involved in the project, pegged the total cost of the development at $2 billion.
Meanwhile, Primavera said that Klehr Harrison has been involved in a $1.5 billion project on behalf of the University of Pennsylvania Health System as they plan a massive new hospital on 33rd Street in West Philadelphia.
Other areas of the city traditionally ignored by residential developers have also seen increased interest recently.
Mellits said that Ballard Spahr was working to represent Parkway Corp. in a joint venture with the Hanover Co. as the two work on a pair of twin buildings on both sides of North Broad Street at Callowhill Street that will feature 339 residential units plus 17,500 square feet of ground-floor retail.
Another major project currently under development is expected to transform an underutilized stretch of Market Street on the east side of City Hall.
Grossman said that Cozen was working on a $600 million project aimed at redeveloping a block of East Market between 11th and 12th Streets to accommodate a 19-story apartment tower that will include some 320 residential units. Another phase of the project, currently under construction, will see the conversion of a shuttered Philadelphia court building into more than 100,000 square feet of prime office space plus a retail anchor.
Swaths of Center City already accustomed to significant residential development have continued to see significant new projects cropping up.
Klehr Harrison has been involved representing Brandywine Realty Trust as they complete their 1919 Market apartment tower, which is slated to include some 320 units.
“That’s right in the middle of the city,” Primavera said. “It’s a tremendous-looking building, and it’s adding real excitement and mixed-use opportunity to the central business district, which really needed that type of vitality.”
Klehr Harrison has also helped represented the Goldenberg Group in a joint venture with Hines as they build a 26-story residential tower on the 1200 block of Walnut Street in Center City that will feature 322 luxury units. Ground on the project was broken in December, according to a Hines press release.
Even with so many multifamily residential projects in the pipeline, attorneys said there was little fear that the market would become too saturated to absorb the new housing stock.
“We’ve got about 3,000 to 4,000 units of residential in the pipeline right now, and we’re seeing the kind of population growth to absorb it,” Grossman said. “There’s a lot of optimism in the market.”
List of Pennsylvania Real Estate Companies:
|West End Associates||http://firstname.lastname@example.org||(610) 435-9669||2231 Walbert Ave
Allentown, PA 18104
|Premes Realtors||http://email@example.com||(610) 437-4424||1225 N Cedar Crest Blvd
Allentown, PA 18104
|Progressive Realty Inc||http://firstname.lastname@example.org||(610) 439-1527||1244 Hamilton St
Allentown, PA 18102
|Jewell Properties Group||http://email@example.com||(215) 352-6552||501 Cambria Ave
Bensalem, PA 19020
|Kurfiss Sotheby’s International Realty||http://firstname.lastname@example.org||(215) 794-3227||6038 Lower York Rd
New Hope, PA 18938
|Lehman Property Management||http://www.rentcentralpa.com/||Glenn@rentcentralpa.com||(717) 652-4434||2740 Penbrook Ave
Harrisburg, PA 17103
|Dream Estate Investments||http://email@example.com||(717) 561-0931||Harrisburg, PA 17111|
|Lawyers Realty||http://firstname.lastname@example.org||(717) 364-3000||4910 Simpson Ferry Rd
Mechanicsburg, PA 17050
|Philly Home Girls||http://email@example.com||(215) 620-8726||223-225 Market St
Philadelphia, PA 19106