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Third QuarTer 2015
DELTA ASSOCIATES
PHILADELPHIA
CLASS A APARTMENT
MARKET REPORT
SPONSORED BY
Third QuarTer 2015
DELTA ASSOCIATES
PHILADELPHIA
CLASS A APARTMENT
MARKET REPORT
SPONSORED BY
By Subscription Only
Prepared For Exclusive Use of SubscribersOn September 30, 2015
© Delta Associates, 2015. All rights reserved.You may neither copy nor disseminate this report. If quoted, proper attribution is required.
Please see www.DeltaAssociates.com for more information on our reports.
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
1. STATE OF THE ECONOMY
The National Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Philadelphia Area Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2. STATE OF THE PHILADELPHIA CLASS A APARTMENT MARKET
State of the Philadelphia Class A Apartment Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Table 2 .1: NCREIF Return Index for Apartment Properties U .S . Apartment Income vs . Pricing . . . . . . . . . . . 23
3. PHILADELPHIA STATISTICAL REPORT
MarkeT indicaTors
Table 3 .1: Philadelphia Metro Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Table 3 .2: Suburban Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Table 3 .3: Southern New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Table 3 .4: City of Philadelphia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
absorpTion suMMary
Table 3 .5: New, Actively Marketing Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Table 3 .6: Recently Stabilized Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ciTy of philadelphia new consTrucTion pipeline
Map 3 .1: Apartment Projects Under Construction and/or Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Table 3 .7: Apartment Projects Under Construction and/or Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Table 3 .8: Planned Apartment Projects That Could be Delivered within 36 Months . . . . . . . . . . . . . . . . . . . . 35
Table 3 .9: Longer Term Planned Apartment Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
MulTifaMily building sales
Table 3 .10: 2014 Apartment Building Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Table 3 .11: 2015 Through June Apartment Building Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4. EXPLANATION OF GEOGRAPHIC COVERAGE AND METHODOLOGY
Methodology and Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Philadelphia Area Apartment Submarket Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Table of conTenTs
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
MulTifaMily TeaM
Although the information contained herein is based on sources which Delta Associates (DA) believe to be reliable, DA makes no representation or warranty that such information is accurate or complete. All prices, yields, analyses, computations, and opinions expressed are subject to change without notice. Under no circumstances should any such information be considered representations or warranties of DA of any kind. Any such information may be based on assumptions which may or may not be accurate, and any such assumption may differ from actual results. This report should not be considered investment advice.
PLEASE NOTE NEW ADDRESS/PHONES:1717 k sTreeT, nw, suiTe 1010, washingTon, dc 20006p: 202.778.3100 | f: 202.778.3101
MuLTIFAMILY PRACTICE TEAM
Senior Vice President, Multifamily Practice Director William E . L . Rich 202-778-3121
Senior Associate Justin Donaldson
Senior Associate Luke Gelber
Senior Associate Rachelle Sarmiento
Associate Kayla Bruun
Associate Dylan Jones
ediTor and chief execuTive: David Weisel, CRE 202-778-3119
of counsel, econoMics: Dr . Stephen S . Fuller 703-993-3186
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
available reporTs froM delTa associaTes
washingTon MeTropoliTan area class b aparTMenT MarkeT reporT
A comprehensive report on apartment market conditions, focusing on the following indicators:
• Analysis of the national and regional economies
• Key market statistics for 30 submarkets and regional totals for:
• Current rents and rent change
• Vacancy
• Concessions
• Renovation information including budget and timetable
• Class B apartment building sales
Additional indicators analyzed in the Fourth Quarter report:
• Fourth Quarter Report: Market-maker survey on capitalization rates, investment posture, thoughts on the economy, and more .
washingTon/balTiMore condoMiniuM MarkeT reporTMarket Coverage: Washington Metro and Baltimore Metro
A comprehensive report on condominium market conditions, focusing on the following indicators:
• Analysis of the national and regional economies
• Regional apartment market summary
• Key market statistics for 12 submarkets and regional totals for:
• Sales trends for new and resale condos
• Historic condominium price changes
• Pipeline trends
• Additional data include:
• Absorption pace
• Multifamily building and land sales
Additional indicators analyzed in the Third Quarter report:
• Third Quarter Report: Comparison of median condo
expenses in the Washington MSA and Mid-Atlantic region
MuLTIFAMILY MARKET
Mid-aTlanTic class a aparTMenT MarkeT reporT Market Coverage: Washington Metro, Baltimore Metro, Philadelphia Metro
A comprehensive report on apartment market conditions, focusing on the following indicators:
• Analysis of the national and regional economies
• Regional condo market summary
• Key market statistics for 47 submarkets and regional totals for:
• Current rents and rent change
• Vacancy
• Concessions
• Class A apartment building sales
Additional indicators analyzed in the Third Quarter and Fourth Quarter reports:
• Third Quarter Report: Comparison of median revenue,
expense, and net operating income data for the USA
and Washington MSA .
• Fourth Quarter Report: Market-maker survey on
capitalization rates, hard and soft development costs,
investment posture, thoughts on the economy, and more
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
available reporTs froM delTa associaTes
FREE REPORTS
Delta Associates publishes free reports on the economy and real estate market, including:
• Washington, DC Metro Retail Outlook (quarterly)
• Washington Metro Area Housing Outlook (quarterly)
• Understanding the Economy (periodic)
• Washington TrendLines (annual)
Delta Associates also publishes occasional white papers on areas of interest . To view sample reports or to subscribe,
please visit www .DeltaAssociates .com .
COMMERCIAL MARKET
washingTon/balTiMore office MarkeT reporTMarket Coverage: Washington Metro and Baltimore Metro
A comprehensive quarterly report on office market conditions, focusing on the following indicators:• Analysis of the national and regional economies
• Metro-level and substate area (Northern Virginia, Suburban
Maryland, District of Columbia) office market summaries
• Key market statistics (All Space and Class A Space) for all
major submarkets and regional totals for:
• Net absorption
• Vacancy
• Construction
• Additional data include:
• Supply/demand analysis
• Rental rate and tenant improvements data
• Average lease terms and operating expenses
• Delivered, proposed, and planned SF
• Building and land sales
• Investment returns
• Cap rate trends
MuLTIFAMILY MARKET (CONTINuED)
philadelphia aparTMenT MarkeT reporT
Market Coverage: Philadelphia Metro
An executive summary-style report on apartment market conditions, focusing on the following indicators:
• Analysis of the regional economy
• Regional apartment market summary
• Regional apartment building sales
• Key market statistics for all major submarkets and
regional totals for:
• Current rents and rent change
• Vacancy
• Concessions
Additional indicators analyzed in the Fourth Quarter report:
• Market-maker survey on capitalization rates, hard & soft
development costs, investment posture, thoughts on the
economy, and more
• Development economics
Special supplements to the report have included:
• Analysis of Federal bailout/stimulus spending
• Impact of stimulus spending on office leasing
• Office rent equilibrium zone study
DELTA A SSOCIATESCelebrating 35 years of research, advisory, and valuation services.
1717 K STREET, NW, SUITE 1010 | WASHINGTON, DC 20006P: 202.778.3100 | WWW.DELTAASSOCIATES.COM |
DAVID WEISEL, CRE Chief Executive
[email protected] | 202.778.3119
JENNIFER GLASER Subscriptions
[email protected] | 202.778.3106
CONTACT US
A MESSAGE FROM THE CEO ON DELTA A SSOCIATES’ 35TH YE AR
Clients, Colleagues, Alumni, and Friends of Delta A ssociates:
As Delta Associates marks its 35th year, it is worth taking a moment to review the breadth and depth of accomplishments and ongoing activities of this remarkable organization:
• Over 100 separate consulting assignments each year, for a wide variety of clients including developers, pension funds, banks, not-for-profit organizations, and state and local government agencies.
• While our activity is concentrated in the Mid-Atlantic, we work with clients all over the U.S. Recent assignments have taken us to the Carolinas, Texas, Tennessee, Connecticut, California, Florida, and Alabama.
• Strategic briefings to key decision makers on economic and real estate market issues.• Delta’s quarterly subscription reports continue to be relied upon by the real estate community for their detailed survey
data and insightful analysis.• Free webinars and complimentary reports provide a concise review of the regional apartment market.• Washington/Baltimore Multifamily Market Overview and Awards for Excellence; 2015 will be the 19th year.• TrendLines, the Washington area’s premier overview of the economy and commercial real estate market, attended by over
1,000 annually and approaching the 19th year this coming February 2016.
I consider myself fortunate to work with an exceptional group of professionals. If we had an aggregate team resume, it would show a long list of education disciplines and job experience credentials. This diverse palette of training and skills allows Delta to apply a broad perspective to our client assignments and publications.
35 years is a long time, especially in the world of real estate consulting firms. Since Delta’s first year, the Dow Jones Industrial Average increased 22-fold, and the inventory of all office space in the Washington area grew by a factor of four. Over the course of 35 years, Delta has:
• Accumulated a contact list of over 6,600 individuals.• Grown our Class A apartment survey to over 227,000 units (from roughly 37,000 in 1996)• Hosted (with our co-sponsors) over 18,000 guests at TrendLines events in Washington, Houston, Dallas Chicago, New York.• Performed valuations on over $275 billion of real estate.
I encourage you to visit our website at www.DeltaAssociates.com to get a sense of our firm. Call or email me or anyone on our team to explore how we can assist with your real estate and economic research and advisory needs.
Regards,
At Kettler Management, we create exceptional value for our partners by ensuring exceptional communities for our residents. Everything we do begins with our company’s core values.
COMMUNITY BUILDINGThrough strong relationships with all stakeholders, we strive to improve the broader community.
VALUE CREATIONOur team members are encouraged to apply their skills and enhance the value of everything we do.
DISTINCTIVE DESIGNWe use innovative and sustainable designs and practices that are recognized as the best in the industry.
TEAM MEMBER ENGAGEMENTWe foster a positive work environment that rewards collaboration and encourages professional growth.
INTEGRITY IN ALL WE DOOur standards of business demand high ethics, total honesty and disciplined work.
EXCEPTIONAL COMMUNITIES. UNBEATABLE RESULTS.
Kettler Management Is Leading the Way.
Learn More at KettlerLiving.com.
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
delTa news
MEDIA
delTa insighTs: each week in The washingTon business Journal
See Delta Associates’ weekly feature in the Washington Business Journal . In each release of Delta Insights, the WBJ highlights key statistics
and analysis from Delta that bring the local commercial real estate market into perspective .
PRESENTATIONS AND EVENTS
washingTon/balTiMore MulTifaMily presenTaTion and awards
The 19th annual Washington/Baltimore Multifamily Presentation and Awards will be held on October 8, 2015 at the Mayflower Hotel in
Washington, DC . Delta’s CEO, David Weisel and Multifamily Practice Director, William Rich, will present an Economic and Real Estate
Market Overview prior to the awards ceremony . To see the list of award winners, or to download the market presentation, please visit
the Multifamily Awards page on our website following the event .
washingTon Trendlines
The 19th annual Washington TrendLines® event is planned for February 4, 2016 at the Ronald Reagan Building and International
Trade Center in Washington, DC . TrendLines® is an invitation-only, annual presentation of market conditions with an outlook
for investment and development opportunities in the period ahead . The event is co-sponsored by PNC Bank, Baker Tilly, and
Transwestern . For an invitation to the event, or to learn more about our TrendLines® presentations and reports, please contact
Jennifer Glaser or visit TrendLinesDC .com .
washingTon area aparTMenT webinars
On July 1, 2015, Delta Associates hosted our Second Quarter 2015 webinar on the Washington apartment market . This webinar series is
sponsored by the ROSS Companies . At each webinar, William Rich, director of Delta Associates’ multifamily practice, provides a short
regional economic overview followed by a comprehensive review of the Washington apartment market . The slide show from each
webinar is available to registrants and to Delta’s clients . For more information, please contact Rachelle Sarmiento .
philadelphia aparTMenT MarkeT presenTaTion and awards
Delta’s 3rd annual Philadelphia Apartment Market event was held on April 21, 2015 at the Four Seasons Hotel in Philadelphia, PA .
The event included a Real Estate Market and Economic Overview presentation and awards for excellence and achievement in the
Philadelphia multifamily industry . This event was co-sponsored by The Bozzuto Group . To download the market presentation from this
event, please visit our website . For more information, please contact Jennifer Glaser .
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
delTa news
recenT speeches and presenTaTions given by delTa execuTives
• American Planning Association, Virginia Chapter Annual Conference: 7 .21 .15
• Delta’s Second Quarter 2015 Apartment Webinar: 7 .1 .15
• Transwestern’s Washington Area Multifamily Market Investor Luncheon: 6 .3 .15
• Delta’s 3rd Annual Philadelphia Apartment Market Overview & Awards of Excellence: 4 .21 .15
• George Mason University Northern Virginia Apartment Summit: 3 .17 .15
• Metropolitan Washington Council of Governments: 3 .10 .15
• International Council of Shopping Centers (ICSC) Mid-Atlantic: 2 .17 .15
• Delta’s 18th Annual Washington TrendLines Event: 2 .5 .15
• Bisnow’s National Multifamily East Conference: 11 .24 .14
upcoMing speeches and presenTaTions by delTa execuTives
• Delta’s 19th Annual Mid-Atlantic Multifamily Awards: 10 .8 .15
• Urban Land Institute DC Metro Office Market Panel: 11 .4 .15
• Delta’s 19th Annual Washington TrendLines Event: 2 .4 .16
PubLICATIONS
undersTanding The econoMy
Delta publishes an electronic newsletter called Understanding the Economy on changes in the national economy and their relevance to
commercial real estate . This newsletter is available free of charge via e-mail, and the latest issue is available here . Please subscribe
to the report via our website .
washingTon area reTail ouTlook
The Washington Area Retail Outlook is a quarterly report in which Delta provides a quantitative and qualitative assessment of the
Washington area retail market, with a focus on grocery-anchored shopping centers . Information is included on vacancy rates, rents,
investment sales, projects of interest, and key trends in the retail market . The report is co-sponsored by The Rappaport Companies
and is available free of charge via e-mail . The latest issue of this report was released in April 2015 . The next issue of the report will be
released in July 2015 . Please subscribe to the report via our website .
washingTon area housing ouTlook
The Washington Area Housing Outlook is a quarterly report in which Delta provides an assessment of the region’s single-family housing
market, including data on pricing, sales volume, and days on market . The report is co-sponsored by George Mason University’s Center
for Real Estate Entrepreneurship and is available free of charge via e-mail . The latest issue of this report was released in April 2015 . The
next issue of the report will be released in July 2015 . Please subscribe to the report via our website .
1sTaTe of
The econoMy
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn 3
GDP REbOuNDS AFTER DISAPPOINTING FIRST QuARTER; STRONG JOb GROWTH CONTINuES
The naTional
econoMyTHIRD QuARTER 2015
The national economy responded positively after a sluggish start
to 2015, with 2nd quarter GDP growth at 2 .3%; the 1st quarter’s
growth rate was also revised higher to 0 .6% . Economic growth
was primarily driven by increased consumer spending, though
lackluster business and government spending limited economic
expansion . Job growth has been strong as well, with the economy
adding 2 .95 million new payroll jobs over the 12 months ending
July 2015 . The private sector provided the vast majority of new
jobs, mainly in the Professional/Business Services, Education/
Health Services, Leisure/Hospitality, and Retail Trade sectors . This
job growth pushed the national unemployment rate down to 5 .3%
as of July 2015, in spite of an increasing labor force participation
rate . Unfortunately, wage growth has remained lackluster, but
this should change over the next couple of years, as increased
hiring forces businesses to compete for top talent .
Another encouraging sign for the national economy is continued
growth in household net wealth and revolving credit . These
trends reflect the upside of the Fed’s accommodative monetary
policy, as lower rates encourage consumers to invest their cash
in riskier assets and reach for their credit cards . After widespread
speculation that it would increase the Federal Funds Rate during
the 3rd quarter, the Fed ultimately decided to leave it unchanged
at its September 2015 meeting . A rate increase still remains
probable in the near future, though not necessarily before the
end of 2015 . Should this happen, it would likely slow consumer
spending and revolving credit somewhat .
Moving forward, the U .S . economy is poised to continue gaining
strength through the remainder of 2015 and beyond . Major
economic indicators are moving in a positive direction, and the
domestic economy does not appear to have been damaged by the
crash of Chinese markets in August or other recent shocks to the
global economy .
CHANGE IN U.S . HOUSEHOLD NET WORTH United States
Source: Federal Reserve Board, Delta Associates; September 2015.
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
12
-MO
NT
H P
ER
CE
NTA
GE
C
HA
NG
E
Cumulative Annual Growth Rate (CAGR) = 3.6%
* As of 1st Quarter 2015.
REVOLVING CREDIT United States
Source: Federal Reserve Board, Delta Associates; September 2015.
-15%
-10%
-5%
0%
5%
10%
15%
1999 2001 2003 2005 2007 2009 2011 2013 2015*
12
-MO
NT
H P
ER
CE
NTA
GE
C
HA
NG
E
*12-month percentage change through June 2015. Note: data are not seasonally adjusted.
MOVING FORWARD, THE ECONOMY IS POISED TO CONTINuE GAINING STRENGTH THROuGH THE REMAINDER OF 2015 AND bEYOND.
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn4
SPONSORED BY KETTLERThe naTional econoMy
PAYROLL JOB GROWTH United States | 12 Months Ending July 2015
-100,000 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000
Federal Government
Information
State and Local Government
Other Services
Wholesale Trade
Transportation/Utilities
Manufacturing
Construction/Mining
Financial Activities
Retail Trade
Leisure/Hospitality
Education/Health
Professional/Business Services
J O B C H A N G E
Source: Bureau of Labor Statistics, Delta Associates; September 2015. Note: Data are not seasonally adjusted.
Now, for a look at major U.S. economic indicators:
payroll Jobs
Job growth has been strong, with the national economy adding
2 .95 million new payroll jobs during the 12 months ending July
2015 . The private sector again accounted for the overwhelming
majority of net additions; the public sector added just 85,000
positions during this period . Month-to-month gains (seasonally
adjusted) from January to July 2015 averaged approximately
211,000 jobs per month:
• April 2015: 187,000
• May 2015: 260,000
• June 2015: 231,000 (Preliminary)
• July 2015: 215,000 (Preliminary)
Public sector hiring has been rebounding this year, particularly
in the state and local government subsectors . At the Federal
level, the workforce is no longer shrinking, but job growth has
been limited . Following 47 consecutive months of year-over-
year declines, Federal employment has actually increased in
each month since January, albeit modestly .
Overall, the public sector has now added jobs (year-over-year)
for 14 consecutive months after consistently shedding jobs over
the previous several years . Federal employment is expected
to remain stable in the next couple of years, as evidenced by
President Obama’s FY 2016 budget proposal, which includes a
$74 billion increase in discretionary investments over what is
allowed under current spending caps . How close this proposal
will resemble the approved budget is unclear, but it signals that
there is a chance the Federal workforce will see an easing of
budget constraints for the first time since 2011 .
During the 12-month period ending July 2015 the top four sectors
in job gains were Professional/Business Services, Education/
Health Services, Leisure/Hospitality, and Retail Trade . These
four sectors alone added about 2 .0 million new jobs, accounting
for 69% of net job growth . Job gains were positive across all
major sectors, and eight of the 13 sectors added at least 148,000
payroll jobs over the year . A healthy Professional and Business
Services sector is especially important for commercial real
estate investors, since these jobs typically boost both retail
spending and office demand .
PAYROLL JOB GROWTH United States | Year-Over-Year
Source: Bureau of Labor Statistics, Delta Associates; September 2015.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Aug. 14 Sep. 14 Oct. 14 Nov. 14 Dec. 14 Jan. 15 Feb. 15 Mar. 15 Apr. 15 May 15 June 15 July 15
Private Sector
Public Sector
TH
OU
SA
ND
S O
F N
EW
PA
YR
OLL
JO
BS
Note: Data are not seasonally adjusted.
5DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLErThe naTional econoMy
INIT IAL UNEMPLOYMENT CLAIMS United States | Four-Week Moving Average
250,000
300,000
350,000
400,000
450,000
500,000
550,000
600,000
650,000
700,000
Peak in Initial Unemployment Claims (not shown) (Week of 3/28/09) = 659,250
15-Year Average = 378,674
INIT
IAL
UN
EM
PLO
YM
EN
T C
LAIM
S
Source: Federal Reserve Bank of St. Louis, Delta Associates; September 2015. Note: Data are seasonally adjusted.
(Week of 08/15/15) = 271,500
UNEMPLOYMENT RATE United States
0%
2%
4%
6%
8%
10%
12%
80 85 90 95 00 05 10 15*
Note: Through July 2015; seasonally adjusted; shaded bars represent recessions. Source: Bureau of Labor Statistics, Delta Associates; September 2015.
U.S
. U
NE
MP
LOY
ME
NT
RA
TE
0%
1%
2%
3%
4%
5%
2007* 2008 2009 2010 2011 2012 2013 2014 2015
AVERAGE HOURLY EARNINGS 12-Month Percentage Growth | 2007- July 2015
* Data available starting March 2007 Source: Bureau of Labor Statistics, Delta Associates; September 2015.
Average 2007-2008 = 3.3%
Average 2009-2014 = 2.1%
12
-MO
NT
H P
ER
CE
NTA
GE
GR
OW
TH
labor force and wages
Overall, initial unemployment claims have decreased steadily
since their peak in March 2009 . As of mid-August 2015 initial claims
stood at 271,500, based on a four-week seasonally-adjusted moving
average . This is 9 .8% below the same week in 2014 and 28 .3% below
the 15-year average of 378,674 . We expect unemployment claims
to continue to steadily decrease through the rest of the year and
beyond, as the national economic expansion continues .
The unemployment rate (seasonally adjusted) declined to 5 .3%
as of July 2015, down from 5 .6% one year earlier . This decline
occurred despite the labor force increasing 2 .1% during the same
time period . The resurgence of the labor force after a long period
of decline in participation is very important, as it illustrates
growing confidence among job seekers that they will actually
secure employment . The unemployment rate should continue to
decline through the rest of 2015 as the economy rebounds, but
at a slower rate as more people enter (or re-enter) the workforce .
An ongoing area of concern for the national economy is the national
average hourly wage, which has increased at a slow rate since the
end of the recession . In July 2015, the average hourly wage saw a 2 .1%
increase from one year prior . By comparison, in 2007—prior to the
recession—the average hourly wage increased by 3 .0% each month
on a year-over-year basis . This is a pressing issue for many aspects
of the economy, including price levels and consumption patterns .
There are multiple competing theories that may explain the weak
wage growth . One is that slow growth in wages is an indicator
that the jobs being created are in lower-paying industries . Even
if people are finding jobs, they are likely to be underemployed,
meaning job seekers are taking jobs that are below the education
and experience levels they have achieved . Another theory has to
do with the changing composition of the workforce . The average
age of workers has remained relatively constant over the last
few years, which indicates that younger workers are entering the
workforce at a faster pace than other age cohorts . These younger
workers tend to start with lower salaries, which may partly explain
depressed average wage growth . A third theory is that, due to slow
moving wage adjustments, known as “sticky” wages, firms could
not adequately reduce wages to equalize with the decrease in
overall demand during the Great Recession, and we are witnessing
a slow correction in wages or “pent-up wage cuts” as workers
become more accepting of reduced nominal wages . Whatever the
reason for the poor performance in wage growth, this metric is
likely to improve in the next few years as a low unemployment
rate will cause firms to compete for talent .
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn6
SPONSORED BY KETTLERThe naTional econoMy
On a brighter note, while workers are not receiving a
significant increase in wages on an hourly basis, they are
successfully finding more full-time jobs . As recently as 2011,
the U .S . economy was adding more part-time than full-time
jobs . Since that time, though, the gap between full-time and
part-time employment growth has been gradually increasing .
Though the gap closed slightly in April, as of July 2015 the gap
between full-time and part-time employment growth is at its
highest level since before the recession . Full-time positions
translate to more hours worked and higher paychecks . Recent
trends in full-time employment seem to also indicate that any
negative effects of Obamacare on full-time hiring have been
blunted by the need for more full-time workers .
Yet another positive sign is the declining job availability
ratio, which measures the relationship between the number
of potential applicants and the number of jobs available . The
national job availability ratio was 1 .49 as of June 2015, down
from 1 .58 in June 2014 . Even Construction, the most troubled
sector by this measure, saw its job availability ratio decline
from 7 .0 in late 2014 to 4 .9 by June 2015 . The Professional/
Business Services sector had the greatest number of job
openings as of June 2015, with 967,000 jobs . The Education/
Health Services sector is the tightest, with a potential
job applicant to job opening ratio at 1 .0, the lowest of all
employment sectors .
gross doMesTic producT (gdp)
The estimate of real GDP growth for the 2nd quarter of 2015
came in at 2 .3%, just slightly below the 2 .4% annual growth
rate for 2014 . An even better piece of news was the updated
1st quarter GDP growth figure, which was revised from the
previous estimate of -0 .7% to +0 .6% . Consumer spending in the
2nd quarter grew more rapidly than predicted, and prices also
increased . The economy shook off many of the weaknesses
in the 1st quarter including harsh weather, declining oil
prices, and accelerated appreciation of the dollar, which sent
net exports plunging . The improving job market is one of the
primary drivers of economic growth, although business and
government spending has remained subdued .
The most recent report from the Federal Reserve Bank of
Philadelphia’s Survey of Professional Forecasters projects real
GDP growth to be 3 .1% in the 3rd quarter and 2 .9% in the 4th
quarter, for an overall growth rate of 2 .4% in 2015 . Looking
further ahead, real GDP is predicted to average 2 .8% in 2016,
2 .8% in 2017, and 2 .5% in 2018 .
NUMBER OF UNEMP LOYED VS. JOB OP ENINGS 12-Month Average Ending June 2015
0 200 400 600 800 1,000 1,200 1,400
Wholesale and retail trade
Leisure and hospitality
Professional and business services
Education and health services
Manufacturing
Construction
Government
Other services
Transportation and utilities
Financial activities
Information
Mining
Number of Job Openings
Number of Unemployed
T H O U S A N D S O F J O B S
Note: Based on 12-month trailing average. Data are not seasonally adjusted. Source: Bureau of Labor Statistics, Delta Associates; September 2015.
GDP PERCENT CHANGE United States
Source: Bureau of Economic Analysis, Delta Associates; September 2015. Note: Quarters are seasonally adjusted at annual rates.
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Q107
Q307
Q108
Q308
Q109
Q309
Q110
Q310
Q111
Q311
Q112
Q312
Q113
Q313
Q114
Q314
Q115
AN
NU
AL
GD
P C
HA
NG
E I
N 2
00
9
CO
NS
TAN
T D
OLL
AR
S
20-Year Average = 2.4%
-6,000
-5,000
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
2010
2011
2012
2013
2014
2015
Full-Time Part-Time
Source: Bureau of Labor Statistics, Delta Associates; September 2015. Note: Data are seasonally adjusted.
EMPLOYMENT LEVELS BY JOB STATUS United States | 2010 – July 2015
12
-Mo
nth
Ne
t C
ha
ng
e i
n
Em
plo
ym
en
t (T
ho
usa
nd
s)
7DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLErThe naTional econoMy
AN N UAL C HAN G E IN EX ISTIN G HOME SALE PRIC ES United States
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2008 2009 2010 2011 2012 2013 2014 2015PE
RC
EN
T C
HA
NG
E F
OR
ME
DIA
N P
RIC
E
OF
SIN
GLE
-FA
MIL
Y H
OM
ES
Source: S&P/Case-Shiller, Delta Associates; September 2015. Note: Data reflect 20-city composite index.
$0
$20
$40
$60
$80
$100
$120
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
2008 2009 2010 2011 2012 2013 2014 2015*
Corporate Profits
S&P 500 12-Month EPS
Note: *Through June 2015, seasonally adjusted at annual rates. Yearly data are not seasonally adjusted. EPS reflect operating earnings as of June 2015.
U.S. CORPORATE PRE-TAX PROFITS
Source: Bureau of Economic Analysis, Standard and Poor's, Delta Associates; September 2015.
CO
RP
OR
AT
E P
RO
FIT
S I
N T
RIL
LIO
NS
S&
P 5
00
12
-MO
NT
H E
PS
corporaTe profiTsU .S . corporate profits totaled $2 .06 trillion during the 2nd
quarter of 2015 on an annualized basis, up 2 .4% from $2 .01
trillion in 1st quarter of 2015, but down slightly from the 2014
total of $2 .07 trillion . Corporate profits have largely plateaued
in recent years as more companies are taking a cautious
approach of buying back shares and slowly increasing
dividends . Companies are continuing to weigh options on
how to best deploy earnings and profits and, in many cases,
are showing a preference for mergers and acquisitions over
riskier, capital intensive projects that could rock the boat for
shareholders . However, the recent increases in hiring indicate
that corporate leaders are becoming more confident about
consumer demand .
housing MarkeT
Home prices in the 20 major metro areas covered by S&P/Case-
Shiller increased 5 .0% during the 12 months ending June 2015,
the most recent data available . This is down from the June
2013 to June 2014 growth rate of 8 .1%, but is more in line with
the pace of overall economic growth . The growth rate of home
prices has largely stabilized in 2015 as expanding inventories of
homes for sale in many metro areas has eased pricing pressure .
The annualized pace of existing home sales increased to 5 .59
million (preliminary) in July 2015 from 5 .07 million in 2014—a
growth rate of 10 .2% . The current sales pace is the fastest seen
since the national housing crash began in 2007 . According
to the National Association of Realtors, the average existing
home sales price was $278,000 (preliminary) in July 2015, up
3 .9% from $267,500 in July 2014 .
Source: National Association of Realtors, Delta Associates; September 2015.
$200,000
$210,000
$220,000
$230,000
$240,000
$250,000
$260,000
$270,000
$280,000
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
Number of Existing Home Sales**
Average Existing Home Sales Price
NU
MB
ER
OF
SA
LES
–
TH
OU
SA
ND
S O
F U
NIT
S
U .S . EXISTING HOME SALES VS. SALES PRICE A
VE
RA
GE
SA
LES
PR
ICE
*Data as of July 2015. ** Seasonally adjusted annual sales rate.
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn8
SPONSORED BY KETTLERThe naTional econoMy
SELECTED U.S . GOVERNMENT INTEREST RATES
0%
1%
2%
3%
4%
5%
6%
7%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
INT
ER
ES
T R
AT
ES
(%
)
Effective Federal Funds Rate
10-Year Treasury
30-Year Treasury
Source: Federal Reserve Economic Data (FRED), Delta Associates; September 2015. Data are non seasonally adjusted monthly averages. 30-Year Treasury not issued between March 2002-Dec. 2005.
BASELINE BUDGET PROJECTIONS United States
Baseline budget projections as of August 2015. Source: Congressional Budget Office, Delta Associates; September 2015.
FE
DE
RA
L D
EF
ICIT
($
BIL
LIO
NS
)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
-1,200
-1,000
-800
-600
-400
-200
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Deficit % of GDP
DE
FIC
IT A
S A
% O
F R
EA
L G
DP
The federal budgeT
The Congressional Budget Office (CBO) projects in its August
2015 Budget Update that the fiscal year (Oct . 1-Sept . 30) 2015
Federal budget deficit will be $426 billion, representing the
smallest deficit since FY 2007 . At 2 .4% of GDP, the FY 2015 budget
is set to be below the average Federal deficit over the past 50
years, and will mark the sixth consecutive year that the deficit’s
share of the GDP has decreased since peaking in 2009 at 9 .8% .
The smaller deficit is attributed to greater than anticipated tax
revenues from businesses and households as a result of the
improving economy . In spite of this progress, the U .S . is still
running a deficit – we are not paying down our debt, we are just
increasing it at a slower rate .
If current laws and spending practices are left alone, the
Federal deficit would increase significantly over the next
decade . The deficit is currently projected to reach $1 .0 trillion
by 2025, with growth driven by an aging population, rising
health care costs, an expansion of Federal subsidies for health
insurance, and growing interest payments on the Federal debt .
The national elections of 2016 could have a major impact on
the long term picture, though, as the outcome could lead to
profound changes in Federal taxation and spending policies .
inTeresT raTes and inflaTion
There has been a great deal of discussion during the 3rd quarter
about when the Fed will increase the Federal Funds Rate, and
by how much . Recent upheaval to the global financial system,
due in part to a faltering Chinese economy, led the Fed to keep
the rate level at its September 2015 meeting . It is still unclear
whether or not the Fed intends to raise the Federal Funds rate
before the end of 2015 .
We expect some short-term volatility in financial markets,
until uncertainty surrounding the Chinese economy, and the
Chinese government’s corrective measures, diminishes . Sectors
that benefit from record-low borrowing rates will experience
the most market volatility . Commercial real estate and the REIT
sphere are experiencing downward pressures as the market
accounts for higher costs of capital, though REITs with solid
property fundamentals should be able to weather the storm .
As of the end of trading on August 31, 2015, the S&P 500 index
stood at 1972 .18, up 1 .3% over the previous 12 months . The Index
reached a 2015 high of 2130 .82 on May 21, up 13% over a year .
Inflation remained flat during the 12 months ending June 2015,
with a strong dollar and lower domestic energy prices keeping
9DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLErThe naTional econoMy
U.S. INFLATION AND PERSONAL CONSUMPTION EXPENDITURE INDEX
Source: Federal Reserve Economic Database (FRED), Delta Associates; September 2015.
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
80 85 90 95 00 05 10 15*
PE
RC
EN
TAG
E C
HA
NG
E
CPI-U PCEPI
Note: *CPI-U and PCEPI through June 2015. Data reflects 12-month percentage change.
prices in check . This is well below the Fed’s benchmark of a
2 .0% increase, which has been a contributing factor to the
delay in raising the Federal Funds Rate . However, the personal
consumption expenditure price index (PCEPI), which takes into
account changes in consumption habits as people substitute some
goods and services for others, rose a substantial 3 .6% during the
12 months ending June 2015 . We expect inflation to be contained
in the near-term due to modest wage growth and a strong dollar,
coupled with the fact that price pressure tends to lag economic
growth by a year or more . Given these conditions, inflation will
likely remain in the 1 .0% to 1 .5% range on an annualized basis
through the remainder of 2015 .
econoMic ouTlook
National economic conditions will show modest improvement
through the latter portion of 2015, before growing at a more
solid pace in 2016 and 2017 . GDP growth only averaged 1 .5%
in the first half of the year, as it has had to overcome a weak
1st quarter for the second consecutive year . A stronger 2nd
quarter is expected to pave the way for more substantial
growth over the balance of the year .
Job growth has definitely been the bright spot of the economic
recovery . In addition, the combination of a declining
unemployment rate and a growing labor force points to greater
confidence in the job market . Sustained employment growth
over the past two years demonstrates the strength of the
national job market .
This good news is tempered by several concerns . First . wage
growth remains weak, as most of the jobs being created are
in lower paying sectors . Second, instability in international
markets – particularly China – may threaten short-term
economic prospects in the U .S . Third, a strong dollar is
hampering net exports significantly . Fourth, the timing and
potential effects of an increase to the Federal Funds Rate
remain unknown .
The next three years are expected to bring a continued steady,
albeit modest, rate of economic growth . The unemployment
rate will continue to decline, and the labor force participation
rate will increase, as hiring increases to support increased
output . Increased hiring should eventually lead to increased
compensation for workers, as companies compete for the best-
qualified employees . The reduced slack should also put upward
pressure on inflation and interest rates . That said, economic
growth has been, and will continue to be slower than in past
economic recovery cycles .
NATIONAL ECONOMIC CONDITIONS WILL SHOW MODEST IMPROVEMENT THROuGH THE LATTER PORTION OF 2015, bEFORE GROWING AT A MORE SOLID PACE IN 2016 AND 2017.
Specifically, we believe the economic outlook is as follows:
• Real GDP growth: 2 .0% in 2015 .
• Payroll jobs: 2 .7 million added in 2015; slightly higher than
last year’s total .
• Housing: Price appreciation around 5% to 5 .5% in 2015 .
• Unemployment rate: 5 .1% at end of 2015 .
• Federal Funds Rate: Hike likely before the end of 2015,
despite limited inflation .
• Long-term interest rates: Edging higher during 2015, though
at a slower pace than short term rates .
• Inflation: Around 1 .0% for 2015 as consumer demand
strengthens, but fuel costs remain low .
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn10
SPONSORED BY KETTLERThe naTional econoMy
12-MonTh payroll eMployMenT change Through July 2015
Job change Job change
MeTro area # % MeTro area # %
LA Basin Orlando 45,300 4 .1%
Los Angeles/Long Beach/Glendale 107,900 2 .6% Denver-Boulder 41,600 2 .7%
Orange County (Santa Ana/Anaheim/Irvine) 49,600 3 .3% Philadelphia 41,500 1.5%
Riverside/San Bernardino/Ontario 50,300 4 .0% Baltimore 41,200 3 .1%
Total LA Basin 207,800 3 .0% Portland (OR) 41,000 3 .8%
New York 164,400 1 .8% Minneapolis-St . Paul 40,300 2 .1%
San Francisco Bay Area Charlotte 37,900 3 .6%
San Jose/Sunnyvale/Santa Clara 61,600 6 .2% Columbus (OH) 33,500 3 .3%
San Francisco/San Mateo/Redwood City 44,600 4 .4% Pittsburgh 32,800 2 .8%
Oakland/Fremont/Hayward 23,200 2 .2% Austin 32,500 3 .6%
Total Bay Area 129,400 4 .2% Tampa-St . Petersburg 31,800 2 .7%
Dallas/Fort Worth 121,700 3 .7% Nashville 31,200 3 .6%
Atlanta 85,000 3 .4% Indianapolis 30,800 3 .1%
Washington, DC 73,800 2 .4% San Antonio 30,700 3 .2%
Seattle 70,700 3 .8% Las Vegas 29,500 3 .4%
South Florida Salt Lake City 28,600 4 .4%
West Palm Beach/Boca Raton 16,500 3 .0% Cincinnati 27,700 2 .7%
Fort Lauderdale 25,700 3 .4% Sacramento 26,400 3 .0%
Miami/Miami Beach/Kendall 27,700 2 .6% Kansas City 23,200 2 .3%
Total South Florida 69,900 2 .9% St . Louis 21,000 1 .6%
Chicago 66,400 1 .5% Jacksonville 19,600 3 .2%
Houston 64,600 2 .2% Raleigh-Durham 18,400 2 .2%
Phoenix 59,200 3 .3% Oklahoma City 14,900 2 .4%
Boston (Metropolitan NECTA) 57,900 2 .2% Cleveland 14,800 1 .4%
San Diego 48,200 3 .6% Memphis 8,900 1 .5%
Detroit (Detroit/Warren/Livonia) 46,900 2 .5% New Orleans (3,800) -0 .7%
Note:Data are not seasonally adjusted.
Source: Bureau of Labor Statistics, Delta Associates; September 2015.
naTional payroll Job growTh suMMaryThe U .S . economy gained 2 .95 million payroll jobs over the 12 months ending July 2015, representing an increase of 2 .1% . This
compares to the 25-year annual average of 1 .2 million jobs at a 1 .0% average growth rate .
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn 11
The philadelphia
area econoMy
THIRD QuARTER 2015
The Philadelphia metro area’s economic performance continues
to be fueled by strong job growth . The region is outperforming
its long-term average job growth thanks largely to the Leisure/
Hospitality, Education/Health Services, and Construction/Mining
sectors . The 41,500 net payroll jobs added during the 12 months
ending July 2015 was the metro area’s highest 12-month figure
since 1999 . During this period, the Leisure/Hospitality sector led
in job gains, adding 12,800 new jobs to the region .
Other economic indicators for the metro area remained positive .
Though it is lagging behind the national rate, the region’s
unemployment rate is 6 .1% as of July 2015, down 70 basis points
from one year ago . The Philadelphia metro area’s housing market
also experienced positive growth . Home prices grew 6 .7% in the 12
months ending June 2015, compared to a 5 .4% increase nationwide .
The outlook for the Philadelphia metro area economy is bright .
Regional employment growth continues on its upward trend,
outperforming its long-term rate of job growth in three consecutive
quarters . Despite fits and starts early in the recovery, home price
appreciation has followed recent employment gains, and wage
growth should slowly pick up as the labor market continues to
recover, especially as the region’s core industries experience growth .
REGION SuSTAINS STRONG JOb GROWTH
p a y r o l l e M p l o y M e n T
ECONOMIC HIGHLIGHTSp h i l a d e l p h i a - c a M d e n - w i l M i n gTo n
M e T r o a r e a | T h i r d Q u a r T e r 2 0 1 5
2.8m i l l i o n
at July
2015
J o b c h a n g e
41.5thousand
12 months ending July
2015
u n e M p l o y M e n T r a T e
6.1% down from
6.8% one year ago
i n f l a T i o n
0.2%12 months
ending June
2015
h o u s i n g p r i c e s
6.7%12 months
ending June
2015Source: BLS, FHFA: September 2015.
at July 2015
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn12
SPONSORED BY KETTLERThe philadelphia area econoMy
payroll Jobs
The Philadelphia-Camden-Wilmington metropolitan area
ranks sixth in population among the nation’s metro areas
with about 6 .1 million residents in 2015, an increase of about
86,000 people (1 .4%) since 2010 . The Philadelphia metro area
also ranks eighth among the largest job markets nationwide,
with 2 .8 million payroll jobs . Job growth in recent years has
surpassed the 20-year annual average of 17,600 jobs . During the
12 months ending July 2015, the metro area economy added
41,500 new payroll positions, sustaining the upward trend that
began in 2010 .
Job growTh by secTor
Nine sectors added jobs in the Philadelphia metro area over
the 12 months ending July 2015 . The top three sectors remain
the same as last quarter: Leisure/Hospitality, Education/Health
Services, and Construction/Mining . Combined, these three
sectors added a total of 31,100 net new jobs to the economy
during the previous 12 months . The Leisure/Hospitality
sector is the frontrunner, gaining 12,800 jobs . The recent
uptick in consumer confidence has had an effect on the
growth of Leisure/Hospitality jobs . Meanwhile, four sectors
lost employment, as the Federal Government, State/Local
Government, Manufacturing, and Information shed a total of
6,900 jobs over the 12 month period ending July 2015 .
PAYROLL JOB GROWTH Philadelphia-Camden-Wilmington Metro Area
-8,000 -4,000 0 4,000 8,000 12,000 16,000
State and Local Government
Manufacturing
Information
Federal Government
Professional/Business Services
Other Services
Wholesale Trade
Retail Trade
Financial Services
Transportation/Utilities
Construction/Mining
Education/Health
Leisure/Hospitality
J O B C H A N G E *
+48,400
-6,900
Source: Bureau of Labor Statistics, Delta Associates; September 2015. *12 months ending in July 2015.
-120
-100
-80
-60
-40
-20
0
20
40
60
80
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15*
20-Year Annual Average = 17,600/Year
TH
OU
SAN
DS
OF
NE
W P
AY
RO
LL
JOB
S (
AN
NU
AL
AV
ER
AG
E)
PAYROLL JOB GROWTH Philadelphia-Camden-Wilmington Metro Area
*12 months ending in July 2015. Source: Bureau of Labor Statistics, Delta Associates; September 2015.
PAYROLL JOB GROWTH Comparable Metro Areas | 12 Months Ending July 2015
TH
OU
SAN
DS
OF
NE
W
PA
YR
OLL
JO
BS
Source: Bureau of Labor Statistics, Delta Associates; September 2015.
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Washington Chicago Philadelphia Baltimore Pittsburgh St. Louis Cleveland
41.5
Trends in eMployMenT by MaJor secTorPhiladelphia-Camden-Wilmington Metro Area
In Thousands
July 2015 12-MonTh change
20-year annual average
Leisure/Hospitality 270 .6 12 .8 3 .9
Education/Health 587 .1 11 .6 9 .5
Construction/Mining 116 .7 6 .7 0 .6
Transportation/Utilities 96 .2 4 .6 0 .5
Financial Services 209 .3 3 .9 0 .3
Retail Trade 300 .2 3 .7 0 .9
Wholesale Trade 125 .4 2 .4 0 .4
Other Services 121 .2 1 .4 1 .3
Professional/Bus . Services 448 .8 1 .3 6 .8
Federal Government 51 .1 (0 .2) (1 .0)
Information 45 .6 (1 .0) (0 .6)
Manufacturing 178 .1 (2 .1) (6 .1)
State/Local Government 256 .8 (3 .6) 1 .1
Total 2,807 41.5 17.6
13DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLErThe philadelphia area econoMy
uneMployMenT raTe
The unemployment rate in the region was 6 .1% (not seasonally
adjusted) as of July 2015, down from 6 .8% one year ago . This
compares to the seasonally-adjusted national rate of 5 .3%
in July 2015, which was down 90 basis points from one year
earlier . Philadelphia has the highest unemployment rate
among comparable metro areas at July 2015 . The rate likely
edged up as formerly discouraged unemployed workers
sought employment . We expect the Philadelphia metro area’s
unemployment rate to stabilize in the mid 5% range during
2015, as new jobs are created while the labor force continues
to grow .
regional consuMer price index
Overall inflation in the Philadelphia-Camden-Wilmington
metro area was 0 .2% during the 12 months ending July 2015 .
This compares to a national inflation rate increase of 0 .1%
during the same period . Local gasoline prices continue to
decline with prices dropping 24 .4% over the 12 months ending
July 2015 . Transportation costs also decreased 6 .7% during the
same time period, compared to a 2 .0% increase from the same
12 month period in 2014 . Medical expenses in the Philadelphia
metro area rose 3 .4% during the 12 months ending July 2015,
slightly above the increase of 3 .3% during the preceding 12
months . For 2015, we expect inflation to be contained locally, as
slowly progressing national economic conditions keep prices
in check, with overall price growth of 1 .0% to 1 .5% . As long as
appropriate monetary measures are in place at the Federal
level, inflation should remain controlled .
housing prices
According to the repeat-sales index of the Federal Housing
Finance Agency (FHFA), home prices in the Philadelphia metro
area went up 6 .7% during the 12 months ending June 2015 . With
prices nationwide increasing 5 .4% during the same period, the
Philadelphia metro area housing market outperformed the
nation for the first time since second quarter 2010 . Despite
some irregular movement in recent years, the combination of
regional economic growth and improving national consumer
confidence has helped the housing market to rebound, albeit
slightly . Regional job gains should bring optimism for the
housing market in the year ahead, with single digit gains as
it keeps pace with construction spending and income growth .
UNEMPLOYMENT RATES Comparable Metro Areas | July 2014 vs. July 2015
0%
1%
2%
3%
4%
5%
6%
7%
8%
Washington Cleveland St. Louis Baltimore Pittsburgh Chicago Philadelphia
July 2014 July 2015
UN
EM
PLO
YM
EN
T R
AT
E
National Rate*
5.3%
6.2%
Basis Point Change -70 -40 -80 -100 -110 -70
Source: Bureau of Labor Statistics, Delta Associates; September 2015.
-140
*Seasonally-adjusted.
AN
NU
AL
PR
ICE
IN
DE
X C
HA
NG
E
CONSUMER PRICE INDEX (CPI) Philadelphia-Camden-Wilmington Metro Area
-3%
-2%
-1%
0%
1%
2%
3%
4%
Jan-09
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
10-Year Annual Average = 2.2%
Note: Data are 12 months ending in each period, through June 2015. Source: Bureau of Labor Statistics, Delta Associates; September 2015.
HOUSING PRICES Philadelphia Metro Area vs. United States
Source: Federal Housing Finance Agency, Delta Associates; September 2015.
PE
RC
EN
T C
HA
NG
E
Note: Seasonally-adjusted. Each value in graph reflects HPI change at second quarter year-over-year.
-10%
-5%
0%
5%
10%
15%
20%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Philadelphia MSAUnited States
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn14
SPONSORED BY KETTLERThe philadelphia area econoMy
hoMe building Trends
There were 14,210 units that received new residential permits
in the Philadelphia metro area from January 2015 to July
2015 . This compares to the 14,508 units during the same time
period in 2014 . Though there is a slight decline over the year,
homebuilding continues to rebound from the slowdown during
the Great Recession . During January 2009 to July 2009, for
example, there were only 7,145 residential units issued with
permits . This upward trend in permitting activity has had a
follow-on effect on the region’s Construction/Mining jobs in
recent quarters .
Though the majority of the permits issued are for single-family
units, an increase in the types of jobs and income categories that
tend to generate demand for rental apartments has triggered
a notable increase in multifamily construction activity . From
January 2015 to July 2015, about 22 .3% of the permits issued
were for structures with 3 or more units . This compares to a
share of only 3 .8% multifamily residential permits given at
year-to-date July 1995 .
region’s core indusTries
The U .S . Conference of Mayors estimates that the Gross
Metropolitan Product (GMP) of the Philadelphia region for all of
2014 totaled at $393 .8 billion, an increase in real terms of 2 .7%
over 2013 . They also project that the Philadelphia GMP will grow
to $406 .6 billion in 2015 and $425 .5 billion by 2016 . The Financial
Activities sector makes up the largest share of the economy,
generating 30% of the Philadelphia metro area’s economic
activity . Other significant components of the region’s economy
are Professional/Technical Services, Wholesale/Retail Trade, and
Education/Health Services, which together account for almost
three-fourths of the total GMP .
philadelphia area econoMic ouTlook
We expect that the Philadelphia metro area will continue to
experience economic expansion . In particular, we expect
regional jobs to grow at a rate above the 20-year average during
the three-year period from 2015 through 2017 . Based on the re-
benchmarking of the Bureau of Labor Statistics’ employment
data, the region is projected to gain a total of 40,000 net new
jobs in 2015, followed by slight growth of 41,000 jobs in 2016 . For
this expansion cycle, employment growth in the Philadelphia
metro area is expected to peak in 2017, adding another 43,000
jobs, based on national trends and the recent performance of
the region’s core industries .
JOB GROWTH Philadelphia-Camden-Wilmington Metro Area
TH
OU
SAN
DS
OF
NE
W P
AY
RO
LL
JOB
S (
AN
NU
AL
AV
ER
AG
E)
-120
-100
-80
-60
-40
-20
0
20
40
60
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
20-Year Average = 17,600/Year
Source: Bureau of Labor Statistics, Delta Associates; September 2015.
3-Year Projected Average = 41,300/Year
Note: Estimate. Percentages may not add to 100% due to rounding.
2014
GMP IN BILLIONS $ % OF GMP Financial Activities $118.1 30%
Professional/Technical Services $59.1 15%
Wholesale and Retail Trade $47.3 12%
Education and Health Services $43.3 11%
Federal and State Government $31.5 8%
Manufacturing $27.6 7%
Leisure and Hospitality $11.8 3%
Transportation and Warehousing $7.9 2%
Other Smaller Core Sectors and Local-Serving Economic Activities $47.3 12%
Total GMP $393.8 100%
CORE ECONOMIC SECTORS Philadelphia-Camden-Wilmington Metro Area
Source: BEA, U.S. Conference of Mayors, Delta Associates; September 2015.
RESIDENTIAL BUILDING PERMITS Philadelphia Metro Area
NU
MB
ER
OF
UN
ITS
Source: U.S. Census, Delta Associates; September 2015.
0
9,000
18,000
27,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
14,210
Note: Each annual data is for year-to-date July.
15DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLErThe philadelphia area econoMy
We expect much of the hiring to be generated by the Philadelphia
region’s economic mainstay: the Education and Health Services
sector . Despite a lackluster performance in recent months,
the Professional/Business Services sector will remain one the
region’s economic drivers, especially as it repositions itself to
service the region’s life sciences industry . The future of the
Philadelphia metro area economy is bright, but recovery likely
will proceed as it has in recent years: on a bumpy – but upward
– trajectory .
SPONSORED BY KETTLERThe philadelphia area econoMy
2sTaTe of The
philadelphia class a
aparTMenT MarkeT
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn 19
The Philadelphia area apartment market remains healthy at third
quarter 2015, spurred in part by job growth over the past twelve
months that was stronger than the 20-year average . Many of these
new jobs have been in sectors with concentrations of lower-wage
occupations, such as the Leisure/Hospitality sector . Expanding job
opportunities with the region’s renowned educational and medical
institutions have also attracted a large number of recent college
graduates . New workers in both of these types of industries tend to
rent rather than own, generating demand for rental apartments in
the metro area — both lower-rent Class B units and more expensive
Class A units . Combined with changing demographic and lifestyle
preferences, stronger job growth likely will sustain long-term
optimism for the regional apartment market .
The Class A stabilized vacancy rate in the region declined 40 basis
points to 2 .5% at third quarter 2015, compared to 2 .9% at this time
last year . This decline occurred despite increased competition from
new deliveries — indicating strong absorption in the Class A market .
• Suburban Pennsylvania vacancy declined 30 basis points to
2 .1% from 2 .4% at September 2014 .
• Vacancy went down 160 basis points in the City of Philadelphia
to 2 .0% from 3 .6% at the same time last year .
• In contrast, Southern New Jersey vacancy rates went up 110
basis points to 4 .0% at third quarter 2015 compared to 2 .9%
one year ago .
All substates in the region saw increases in effective rents over
the year . The metro area has experienced year-over-year effective
rent increases for five consecutive quarters since third quarter
2014 . For the 12-month period ending September 2015, here are
the effective rent changes:
• City of Philadelphia up 3 .6%
• Suburban Pennsylvania up 0 .8% .
• Southern New Jersey up 3 .4% .
sTaTe of The philadelphia
class a aparTMenT MarkeT
THIRD QuARTER 2015
APARTMENT MARKET bENEFITS FROM STRONG REGIONAL JOb GROWTH
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn20
SPONSORED BY KETTLERsTaTe of The philadelphia class a aparTMenT MarkeT
Metro-wide, effective rents rose 2 .3% from the third quarter 2014 .
Average metro-wide effective rents at third quarter 2015 are
$1,763, or $1 .80 per SF . Effective rents average $2,248 ($2 .45 per SF)
for high-rise product in the City of Philadelphia and $1,514 ($1 .50
per SF) for low-rise product in the suburbs .
ciTy of philadelphia
Philadelphia’s growing core of recent college graduates and
improving job opportunities for them has helped generate
demand for new rental apartments in the city, especially in
Center City and University City . Job growth at companies
in the “Eds and Meds” and technology sectors, specifically
with companies that have expanded to Philadelphia, has
attracted the younger, Millennial group . Those in this age
cohort tend to rent and choose the conveniences of living in
apartments located downtown . These recent employment and
demographic trends have bolstered rent growth in the city,
with effective rents increasing 3 .6% over the past year . Robust
demand has also kept the stabilized vacancy rate low, with
the citywide vacancy rate decreasing 160 basis points from
September 2014 to 2 .0% .
Increased development activity, however, raises near-
term concerns for this currently-healthy market . A more
competitive landscape is expected in the next 12 months as
more projects currently under construction deliver . Currently,
there are 4,380 available units under construction or planned
for delivery in the next 36 months, after accounting for
attrition . Philadelphia’s supply/demand relationship indicates
that vacancy will edge up slightly and rent growth is likely to
stabilize near its five-year average over the next 24 months .
Over the long-term, however, we expect Philadelphia to
remain a healthy market .
suburban pennsylvania
Effective rents in Suburban Pennsylvania increased slightly
by 0 .8% over the year . Meanwhile, the stabilized vacancy rate
decreased to 2 .1% from last year’s rate of 2 .4% . Effective rents
increased in all of the submarkets in Suburban Pennsylvania,
albeit only slightly . In the 12 months ending September 2015,
rents in Montgomery County went up 0 .4%, rents in Delaware
and Chester counties increased 0 .4%, and apartments in
Bucks County experienced a rent increase of 2 .3% . Meanwhile,
the stabilized vacancy rate in Suburban Pennsylvania is
2 .1% at third quarter 2015 . Vacancy is 1 .6% in Bucks County,
2 .8% in Montgomery County, and 1 .8% in Delaware and
Chester counties . This compares with 1 .6%, 4 .9%, and 0 .9%,
respectively, one year ago .
EFFECTIVE RENT AND VACANCY RATE Class A Apartments | Philadelphia Metro
$1,000
$1,100
$1,200
$1,300
$1,400
$1,500
$1,600
$1,700
$1,800
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
Average Effective Base RentStabilized Vacancy
STA
BIL
IZE
D V
AC
AN
CY
RA
TE
AV
ER
AG
E E
FFE
CT
IVE
BA
SE
RE
NT
Source: Delta Associates, September 2015.
2 . 9 % / Y E A R L O N G - T E R M R E N T G R O W T H
* As of Third Quarter.
AN
NU
AL
NE
T A
BS
OR
PT
ION
O
F A
LL C
LAS
SE
S O
F U
NIT
S
ANNUAL ABSORPTION OF APARTMENTS Major Apartment Markets | Long-Term Average
Source: REIS, Delta Associates; September 2015.
Note: Excludes NY metro to conserve scale.
896
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
DFW Hou Was Atl LA Phx Balt Phil Chi Pgh
Class A Absorption in City of Philadelphia Over Past 12 Months
= 986
RENTER HOUSEHOLDS Philadelphia Metro Area vs. U.S. | 2006 - 2015
RE
NT
ER
S A
S %
OF
TOTA
L H
OU
SE
HO
LDS
26%
27%
28%
29%
30%
31%
32%
33%
34%
35%
36%
37%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
Philadelphia Metro
U.S.
Source: U.S. Census Bureau, Delta Associates; September 2015.
* As of the Second Quarter.
21DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLErsTaTe of The philadelphia class a aparTMenT MarkeT
start map proJecTs ThaT sTarTed consTrucTionciTy of philadelphia | Third QuarTer 2015
size of proJecT (uniTs)
less than 150
150-300
More than 300
n
Source: Delta Associates, September 2015.
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn22
SPONSORED BY KETTLERsTaTe of The philadelphia class a aparTMenT MarkeT
A W O R D A b O u T O u R D E F I N I T I O N O F VA C A N C Y R AT E
We sometimes hear from apartment developers and managers
that their portfolio vacancy rate is 200 to 400 basis points higher
than the numbers we report, which places them under unfair
investor scrutiny. While we state methodological matters at
the end of our report (Section 5), we thought it appropriate to
describe here our term “vacancy.”
When we conduct our quarterly surveys, we obtain information
on “units available to lease” – that is, physical vacancy.
Obtaining the information this way, of course, may produce
several important differences from “vacancy” as reported in
your financial statements. Simply stated, the difference can
be characterized as:
Delta’s Definition: Available units to lease
Operating Statement Vacancy: Economic vacancy
Our definition (available units) may therefore be understated
compared to yours (economically vacant) by our exclusion of
units occupied by non-paying tenants (which we cannot know),
and of units not available for lease, such as employee units and
model apartments. We estimate that this adds about 100 to 150
basis points to your definition of vacancy, as compared with
ours. Our vacancy rate may also be understated, compared
with yours, by our exclusion of what are economically vacant,
on-notice units for which a lease to occupy in the future has
been signed (hence, they are not currently available to lease).
We estimate that this potentially adds another 150 to 200 basis
points to your definition of vacancy, as compared to ours.
CLASS A APARTMENT RENT PER SF Philadelphia Metro Area | 4th Quarter 2005 – 2015
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$2.20
$2.40
$2.60
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
Center City So. NJ Sub. PA Phil Metro
$2.45
$1.80
Source: Delta Associates, September 2015.
$1.50 $1.47
* As of Third Quarter.
souThern new Jersey
Effective rents increased in all of the submarkets in Southern New
Jersey . In Camden County, effective rents increased 5 .8% at third
quarter 2015 . Rents in Burlington County and Mercer County also
increased over the year, up 1 .2% and 4 .8%, respectively . Overall,
Southern New Jersey has a stabilized vacancy rate of 4 .0% this
quarter, up from 2 .9% last year . Burlington County experienced
a decrease in vacancy rates, from 2 .8% one year ago to 2 .1% this
quarter . Meanwhile, stabilized vacancy rates increased in Camden
County and Mercer County . The vacancy rate in Camden County
doubled to 6 .0% from September 2014 while Mercer County
experienced an increase in the stabilized vacancy rate to 2 .7%,
from 0 .9% last year .
ouTlook
In the short run, the Philadelphia metro area apartment market
will experience some pressure on occupancy due to the highly
competitive environment from the historically-large volume
of new deliveries . As these new units are absorbed (and as this
new supply inevitably leads to delays for other planned projects),
market conditions are expected to normalize .
Although a high volume of new product will still be delivering
over the next twelve months, the apartment market is poised for
steady growth thanks to continued improvement in the regional
job market . In particular, the recent increase in the types of jobs in
income and demographic categories that tend to rent rather than
own will benefit the rental apartment market .
In the intermediate- and long-term, we expect the renter share of
Philadelphia metro area households to continue to rise through this
housing cycle, supporting robust demand for Class A apartments .
Over the next 24 months we expect annual rent growth in the
region to remain in the 2% to 4% range . Three years from now,
many submarkets will have strong development prospects .
naTional council of real esTaTe invesTMenT fiduciaries
23DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLEr
12-MONTH METRO AREA TOTAL RETURN 1
Atlanta 20.46%
Austin 12.69%
Dallas 12.55%
Chicago 12.39%
National Average 11.60%
Houston 10.95%
Phoenix 10.64%
Baltimore 8.73%
Philadelphia 7.64%
Washington 3.88%
1 NCREIF compiles returns based on its members' $70 billion apartment portfolio. The index includes both current income and estimated capital appreciation returns.
Source: Delta Associates, based on trailing 12-month data in NCREIF "Real Estate Performance Report: Second Quarter 2015".
TABLE 2.1NATIONAL COUNCIL OF REAL ESTATE INVESTMENT FIDUCIARIES
Return Index | Investment Grade Apartment Properties
12 Months Ending June 2015 1
TOTAL APARTMENT INVESTOR RETURNS Philadelphia Metro vs. U.S. | 2007 – Q2 2015
-35
-25
-15
-5
5
15
25
U.S. Philadelphia Metro
Source: NCREIF, Delta Associates, September 2015.
TOTA
L RE
TURN
(IN
COM
E +
APPR
ECIA
TIO
N)
2007 2008 2009 2010 2011 2012 2013 2014 Q2 2015
SPONSORED BY KETTLERnaTional council of real esTaTe invesTMenT fiduciaries
philadelphia
sTaTisTical
reporT
3
philadelphia sTaTisTical reporT
27DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLEr
Table 3.1 Philly Q3 2015 Class A Tables.xlsxX:\DELTA\OLDSERV\Open Projects\14222\Q3 2015\Philly Q3 2015 Class A Tables.xlsx
GEOGRAPHIC AREA
Number of Units Surveyed 7,934 3,536 11,470 5,897 17,367
Rent Levels (Avg. of All Unit Sizes)
Face Rent $1,540 $1,481 $1,522 $2,260 $1,772
Concession as a % of Face Rents 0.6% 0.3% 0.5% 0.5% 0.5%
Effective Rent $1,530 $1,477 $1,514 $2,248 $1,763
Effective Rent per Square Foot $1.50 $1.47 $1.50 $2.45 $1.80
Annual Effective Rent Increase
- Since 9/30/10 2.0% 1.9% 2.0% 2.0% 2.0%
- Since 9/30/14 ¹ 0.8% 3.4% 1.6% 3.6% 2.3%
Vacancy September 2015
Overall 2 7.7% 4.0% 6.6% 11.6% 8.3%
Stabilized 3 2.1% 4.0% 2.7% 2.0% 2.5%
Vacancy September 2014
Overall 2 3.3% 2.9% 3.2% 8.9% 5.0%
Stabilized 3 2.4% 2.9% 2.6% 3.6% 2.9%
1 Excludes projects that were not actively marketing at date of previous survey, i.e. same project/unit price comparison.2 Includes actively marketing projects.3 Excludes actively marketing projects.Source: Compiled by Delta Associates, 1717 K Street, NW, Suite 1010, Washington, DC 20006. Phone: (202) 778-3100.
Phone: (202) 778-3100. Last Update: September 2015.
TABLE 3.1KEY MARKET INDICATORS FOR CLASS A RENTAL APARTMENTS
Summary | Philadelphia Metropolitan AreaThird Quarter 2015
MARKET INDICATORPHILADELPHIA METRO AREA
TOTAL/AVERAGESUBURBAN
PENNSYLVANIASOUTHERN
NEW JERSEY
SUBTOTAL- PHILADELPHIA
SUBURBS
CITY OF PHILADELPHIA
philadelphia sTaTisTical reporT
DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn28
SPONSORED BY KETTLER
Table 3.2 Philly Q3 2015 Class A Tables.xlsxX:\DELTA\OLDSERV\Open Projects\14222\Q3 2015\Philly Q3 2015 Class A Tables.xlsx
Number of Units Surveyed 2,776 3,736 1,422
Rent Levels
Face Rent $1,514 $1,577 $1,492
Concession as a % of Face Rents 1.3% 0.3% 0.0%
Effective Rent $1,494 $1,572 $1,492
Effective Rent per Square Foot $1.45 $1.53 $1.54
Annual Effective Rent Increase
- Since 9/30/10 1.5% 2.9% 0.8%
- Since 9/30/14 ² 0.4% 0.4% 2.3%
Vacancy September 2015
Overall 3 8.7% 9.3% 1.6%
Stabilized 4 2.8% 1.8% 1.6%
Vacancy September 2014
Overall 3 4.9% 2.8% 1.6%
Stabilized 4 4.9% 0.9% 1.6%
1 Includes walk-up and elevator-served apartments of one to four stories.2 Excludes projects that were not actively marketing at date of previous survey, i.e. same project/unit price comparison.3 Includes actively marketing projects.4 Excludes actively marketing projects.
Source: Compiled by Delta Associates, 1717 K Street, NW, Suite 1010, Washington, DC 20006. Phone: (202) 778-3100.Phone: (202) 778-3100. Last Update: September 2015.
0.8%
7.7%
2.1%
3.3%
2.4%
2.0%
TABLE 3.2KEY MARKET INDICATORS FOR CLASS A LOW-RISE RENTAL APARTMENTS 1
Selected Submarkets | Suburban PennsylvaniaThird Quarter 2015
MARKET INDICATOR
SUBMARKETSUBURBAN
PENNSYLVANIA TOTAL/AVERAGE
MONTGOMERY COUNTY
DELAWARE & CHESTER COUNTIES
BUCKSCOUNTY
7,934
$1,540
0.6%
$1,530
$1.50
philadelphia sTaTisTical reporT
29DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLEr
Table 3.3 Philly Q3 2015 Class A Tables.xlsxX:\DELTA\OLDSERV\Open Projects\14222\Q3 2015\Philly Q3 2015 Class A Tables.xlsx
Number of Units Surveyed 1,704 1,832 3,536 1,929
Rent Levels
Face Rent $1,596 $1,374 $1,481 $1,784
Concession as a % of Face Rents 0.4% 0.1% 0.3% 0.0%
Effective Rent $1,589 $1,373 $1,477 $1,784
Effective Rent per Square Foot $1.53 $1.42 $1.47 $1.67
Annual Effective Rent Increase
- Since 9/30/10 1.8% 2.0% 1.9% 2.1%
- Since 9/30/14 ² 5.8% 1.2% 3.4% 4.8%
Vacancy September 2015
Overall 3 6.0% 2.1% 4.0% 2.7%
Stabilized 4 6.0% 2.1% 4.0% 2.7%
Vacancy September 2014
Overall 3 3.0% 2.8% 2.9% 0.9%
Stabilized 4 3.0% 2.8% 2.9% 0.9%
1 Includes garden and low-rise style apartments, mid-rise apartments, high-rise apartments, and warehouse conversions.2 Excludes projects that were not actively marketing at date of previous survey, i.e. same project/unit price comparison.3 Includes actively marketing projects.4 Excludes actively marketing projects.
Source: Compiled by Delta Associates, 1717 K Street, NW, Suite 1010, Washington, DC 20006. Phone: (202) 778-3100.Phone: (202) 778-3100. Last Update: September 2015.
TABLE 3.3KEY MARKET INDICATORS FOR CLASS A LOW-RISE RENTAL APARTMENTS 1
Selected Submarkets | Southern New Jersey and Mercer CountyThird Quarter 2015
MARKET INDICATOR
SUBMARKETSOUTHERN NEW JERSEY
TOTAL/AVERAGEMERCERCOUNTYCAMDEN
COUNTYBURLINGTON
COUNTY
philadelphia sTaTisTical reporT
DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn30
SPONSORED BY KETTLER
Number of Units Surveyed 5,897
Rent Levels
Face Rent $2,260
Concession as a % of Face Rents 0.5%
Effective Rent $2,248
Effective Rent per Square Foot $2.45
Annual Effective Rent Increase
- Since 1988 3.3%
- Since 9/30/10 2.0%
- Since 9/30/14 ¹ 3.6%
Vacancy September 2015
Overall 2 11.6%
Stabilized 3 2.0%
Vacancy September 2014
Overall 2 8.9%
Stabilized 3 3.6%
Absorption Trends
986
Supply Projections
# of Market Rate Units Under Construction & Available
Plus Planned for Delivery in the Next 36 Months 4
For Comparison
at 9/30/2014 4,846
1 Excludes projects that were not actively marketing at date of previous survey, i.e. same project/unit price comparison.2 Includes actively marketing projects.3 Excludes actively marketing projects.4 See list of under construction and planned projects on Tables 5.6 and 5.7. Accounts for attrition.Source: Compiled by Delta Associates, 1717 K Street, NW, Suite 1010, Washington, DC 20006. Phone: (202) 778-3100.
Phone: (202) 778-3100. Last Update: September 2015.
# of Market Rate Units Absorbed Over the Past 12 Months
4,342
TABLE 3.4KEY MARKET INDICATORS FOR CLASS A RENTAL HIGH-RISE APARTMENTS
City of PhiladelphiaThird Quarter 2015
MARKET INDICATORCITY OF
PHILADELPHIA
philadelphia sTaTisTical reporT
31DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLEr
1. AQ Rittenhouse 70 12/14 82. 3737 Chestnut 99 2/15 123. Avenir on Fifteenth 108 3/15 154. 3601 Market Street 73 5/15 155. The Shirt Corner 44 5/15 11
Total: 394 -- 12
Source: Delta Associates, 1717 K Street, NW, Suite 1010, Washington, DC 20006. Phone: (202) 778-3100.Last update: September 2015
DATE MARKETING BEGAN
TABLE 3.5ABSORPTION SUMMARY
ACTIVELY MARKETING RENTAL APARTMENT PROJECTSCity of Philadelphia | Third Quarter 2015
OVERALL MONTHLY LEASE-UP PACE
11027618036359
988
1 Includes market rate units only.
COMP. # PROJECT NAME/LOCATION TOTAL UNITS 1 UNITS ABSORBED 1
philadelphia sTaTisTical reporT
DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn32
SPONSORED BY KETTLER
TABLE 3.6ABSORPTION SUMMARY
RECENTLY STABILIZED APARTMENT PROJECTSCity of Philadelphia | Third Quarter 2015
1. 600 on Broad 7/11 2/12 132. The Commonwealth 9/11 5/12 113. Penn Treaty Village Pennthouses, Ph. 1 11/11 3/13 84. 229 Arch 2/12 6/13 135. The Arch 7/12 2/13 146. 2040 Market Street 8/12 6/13 267. Tower Place - Phase I 12/12 6/15 78. 2116 Chestnut Street 2/13 3/15 129. Goldtex Building 3/13 3/15 7
10. The Sansom 4/13 3/14 811. 320 Walnut 5/13 12/13 1112. The Granary 5/13 12/14 1213. Icon 11/13 6/15 1114. Station at Manayunk 1/14 8/15 715. Southstar Lofts 2/14 3/15 616. The Croydon 4/14 3/15 1217. 1900 Arch 4/14 3/15 2218. 31 Brewerytown 8/14 9/15 5
Total: -- -- 102,7491 Includes market rate units only.
Source: Delta Associates, 1717 K Street, NW, Suite 1010, Washington, DC 20006. Phone: (202) 778-3100.Last update: September 2015
64
20432116310477
22720614979
127246
282
10098
12665
111
DATE STABILIZEDOVERALL MONTHLY
LEASE-UP PACECOMP. # PROJECT NAME/LOCATION TOTAL UNITS 1 DATE MARKETING BEGAN
philadelphia sTaTisTical reporT
33DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLEr
Source: Delta Associates, 1717 K Street NW, Suite 1010, Washington, DC 20006; Phone: (202) 778-3100.
Last update: September 2015.
Low rise renovation map
proJecTs under consTrucTion
in lease-up
not yet leasing
Map 3.1Rental apaRtMent pRojects UndeR constRUction and/oR MaRketing | city of pHiladelpHia
Third Quarter 2015
n
philadelphia sTaTisTical reporT
DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn34
SPONSORED BY KETTLERTA
BLE
3.7
REN
TAL
APAR
TMEN
T PR
OJE
CTS
UN
DER
CON
STRU
CTIO
N A
ND/
OR
MAR
KETI
NG
City
of P
hila
delp
hia
Thir
d Qu
arte
r 201
5
Proj
ect N
ame
Proj
ect T
ype
Loca
tion
Spon
sor(
s)#
of M
kt. R
ate
Uni
ts#
of U
nits
Ab
sorb
ed#
of A
vaila
ble
Uni
tsD
ate
Pre-
Lsg.
Be
gins
Inita
l Occ
up.
Dat
eD
ate
Cons
tr.
Com
plet
e
1Th
e Fa
irmou
nt a
t Bre
wer
ytow
nM
id-R
iseBr
ewer
ytow
nM
cSpa
in P
rope
rtie
s16
20
162
4Q 2
015
4Q 2
015
4Q 2
015
2Th
e Co
mm
ons o
f Bre
wer
ytow
nM
id-R
iseBr
ewer
ytow
nW
estr
um D
evel
opm
ent C
ompa
ny10
00
100
N/A
N/A
2016
316
01 V
ine
Stre
etHi
gh-R
iseCa
llow
hill
Prop
erty
Res
erve
, Inc
271
027
12Q
201
63Q
201
61Q
201
74
Mus
eum
Tow
ers I
IHi
gh-R
iseCa
llow
hill
Fore
st C
ity28
60
286
2Q 2
016
3Q 2
016
4Q 2
016
5W
aver
ly P
lace
Mid
-Rise
Cent
er C
ityPe
arl P
rope
rtie
s60
060
2016
2016
2016
619
19 M
arke
t Str
eet
High
-Rise
Loga
n Sq
uare
Bran
dyw
ine
Real
ty T
rust
321
032
14Q
201
51Q
201
62Q
201
67
1112
-28
Ches
tnut
Mid
-Rise
Mar
ket E
ast
Bric
ksto
ne R
ealty
112
011
24Q
201
54Q
201
510
/201
58
The
Griff
inHi
gh-R
iseM
arke
t Eas
tM
RP R
ealty
217
021
72Q
201
62Q
201
62Q
201
69
Mur
al L
ofts
Mid
-Rise
Nor
th B
road
Eric
Blu
men
feld
560
564Q
201
54Q
201
54Q
201
510
Penn
Tre
aty
Villa
ge P
ennt
hous
es, P
h. 2
Mid
-Rise
Nor
ther
n Li
bert
ies
Core
Rea
lty10
00
100
2015
2015
2015
11O
ne W
ater
Str
eet
High
-Rise
Old
City
PMC
Prop
erty
Gro
up25
00
250
4Q 2
015
2016
4Q 2
016
12Br
idge
High
-Rise
Old
City
Brow
n Hi
ll De
velo
pmen
t13
10
131
4Q 2
016
4Q 2
016
1Q 2
017
13Br
oad
Stre
et A
rmor
yM
id-R
isePa
ssyu
nk S
quar
eM
icha
el C
aros
ella
500
5020
1620
162Q
201
614
The
Shirt
Cor
ner
High
-Rise
Phila
delp
hia
Dow
ntow
nCe
ntru
m P
artn
ers
5944
152Q
201
58/
2015
3Q 2
015
15AQ
Ritt
enho
use
Mid
-Rise
Ritt
enho
use
Squa
reAq
uina
s Rea
lty P
artn
ers
110
7040
12/2
014
4/20
152Q
201
516
Aven
ir on
Fift
eent
hHi
gh-R
iseRi
tten
hous
e Sq
uare
Alte
rra
Prop
erty
Gro
up18
010
872
3/20
155/
2015
3Q 2
015
17Da
lian
on th
e Pa
rkHi
gh-R
iseRo
din
Squa
reDa
lian
Deve
lopm
ent
293
029
31Q
201
64Q
201
64Q
201
618
Divi
ne L
orra
ine
High
-Rise
Sprin
g Ga
rden
EB R
ealty
Man
agem
ent C
orp.
109
010
91Q
201
71Q
201
74/
2017
1937
37 C
hest
nut
High
-Rise
Uni
vers
ity C
ityRa
dnor
Pro
pert
y Gr
oup
276
9917
72/
2015
8/20
1510
/201
520
3601
Mar
ket S
tree
tHi
gh-R
iseU
nive
rsity
City
Sout
hern
Lan
d Co
.36
373
290
2Q 2
015
2Q 2
015
7/20
1521
FMC
Tow
erHi
gh-R
iseU
nive
rsity
City
Bran
dyw
ine
Real
ty T
rust
268
026
820
1620
162Q
201
622
East
Mar
ket -
Pha
se I
High
-Rise
Was
hing
ton
Squa
re W
est
Nat
iona
l Rea
l Est
ate
Deve
lopm
ent
100
010
020
1620
162Q
201
6To
tal:
--
-3,
874
394
3,48
0-
--
Sour
ce: C
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led
by D
elta
Ass
ocia
tes,
1717
K S
tree
t, N
W, S
uite
101
0, W
ashi
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n, D
C 20
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Pho
ne: (
202)
778
-310
0. L
ast U
pdat
e: S
epte
mbe
r 201
5.
philadelphia sTaTisTical reporT
35DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLEr
Proj
ect N
ame
Loca
tion
# of
Mkt
. Rat
e U
nits
Prop
er Z
onin
g?In
itial
Ap
prov
als?
Site
Pla
n Ap
prov
edBl
dg. P
mts
. Is
sued
?Es
t. Co
nstr
. St
art D
ate
170
9 Ch
estn
ut S
tree
tCe
nter
City
304
Yes
Yes
No
No
4Q 2
015
2M
IC T
ower
Cent
er C
ity34
2Ye
sYe
sYe
sN
o4Q
201
53
Resid
ence
s at t
he C
urtis
- Ph
ase
ICe
nter
City
55Ye
sYe
sN
oN
o4Q
201
54
East
ern
Tow
erCh
inat
own
112
Yes
Yes
No
No
4Q 2
015
5Ed
gew
ater
- Ph
. II
Loga
n Sq
uare
240
Yes
Yes
Yes
No
1Q 2
016
6Ha
nove
r Nor
th B
road
Loga
n Sq
uare
339
Yes
Yes
Yes
No
12/2
015
7Ar
tisan
Lof
tsLo
Mo
151
Yes
Yes
Yes
No
2016
8Th
e Is
leM
anay
unk
156
Yes
Yes
Yes
No
N/A
912
13 W
alnu
t Str
eet
Mar
ket E
ast
322
Yes
Yes
Yes
No
4Q 2
015
10Sp
ring
Gard
en V
iew
Nor
ther
n Li
bert
ies
30Ye
sYe
sN
oN
o4Q
201
511
Libe
rty
Squa
reSo
uth
Kens
ingt
on19
1Ye
sYe
sYe
sN
o20
1512
East
Mar
ket -
Pha
se II
Was
hing
ton
Squa
re W
est
222
Yes
Yes
Yes
No
2016
Tota
l: -
2,46
4-
--
Tota
l with
Att
ritio
n:
-86
2-
--
Not
e: P
roje
cts p
lann
ed to
del
iver
thei
r fir
st u
nits
in th
e ne
xt 3
6 m
onth
s. Pr
obab
ility
of m
ater
ializ
atio
n is
estim
ated
usin
g an
att
ritio
n ra
te o
f 65%
of t
otal
uni
ts p
lann
ed. I
f we
have
miss
ed y
our p
roje
ct, p
leas
e co
ntac
t us.
Not
e: N
ames
of s
pons
ors a
re n
o lo
nger
ava
ilabl
e to
subs
crib
ers,
unle
ss y
ou p
rovi
de d
ata
for t
his t
able
. If y
ou p
rovi
de d
ata
for t
his t
able
and
wish
to k
now
sele
ct
spon
sors
' nam
es, e
-mai
l you
r req
uest
to R
ache
lle.S
arm
ient
o@De
ltaAs
soci
ates
.com
.
Sour
ce: C
ompi
led
by D
elta
Ass
ocia
tes,
1717
K S
tree
t, N
W, S
uite
101
0, W
ashi
ngto
n, D
C 20
006.
Pho
ne: (
202)
778
-310
0. L
ast U
pdat
e: S
epte
mbe
r 201
5.
Mid
-Rise
High
-Rise
Mid
-Rise
Mid
-Rise
High
-Rise
- -
Mid
-Rise
TABL
E 3.
8RE
NTA
L PR
OJE
CTS
PLAN
NED
TO
DEL
IVER
OVE
R TH
E N
EXT
36 M
ON
THS
City
of P
hila
delp
hia
Thir
d Qu
arte
r 201
5
Proj
ect T
ype
High
-Rise
High
-Rise
High
-Rise
High
-Rise
High
-Rise
Mid
-Rise
philadelphia sTaTisTical reporT
DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn36
SPONSORED BY KETTLERTA
BLE
3.9
SUM
MAR
Y O
F LO
NG
ER-T
ERM
PLA
NN
ED/R
UM
ORE
D R
ENTA
L AP
ARTM
ENT
PRO
JECT
S
Proj
ect N
ame
Loca
tion
# of
Mkt
Rat
e U
nits
Prop
er
Zoni
ng?
Initi
al
Appr
oval
s?Si
te P
lan
Appr
oved
Bldg
Pm
ts
Issu
ed?
Est.
Cons
tr.
Star
t Dat
e1
Broa
d &
Was
hing
ton
Aven
ue o
f the
Art
s80
0Ye
sN
oN
oN
oN
/A2
Mar
ketp
lace
Des
ign
Cent
erCe
nter
City
300
No
No
No
No
N/A
3O
ne F
rank
lin P
laza
Cent
er C
ity30
0N
oN
oN
oN
oN
/A4
1421
Eas
t Col
umbi
a Av
enue
Fish
tow
n54
No
No
No
No
N/A
5Ed
war
d Co
rner
Bui
ldin
gFi
shto
wn
180
Yes
Yes
No
No
N/A
621
00 H
amilt
onLo
gan
Squa
re12
0N
oN
oN
oN
oN
/A7
23rd
& C
herr
yLo
gan
Squa
re20
0N
oN
oN
oN
oN
/A8
Rive
rwal
kLo
gan
Squa
re66
5Ye
sYe
sN
oN
oN
/A9
1300
Fai
rmou
ntN
orth
Bro
ad48
6N
oYe
sN
oN
oN
/A10
218
Arch
Str
eet
Old
City
116
No
No
No
No
N/A
1140
1 Ra
ceO
ld C
ity21
6N
oN
oN
oN
oN
/A12
Pier
12
Old
City
120
No
No
No
No
N/A
13Pi
ncus
Bro
. Max
wel
l Bui
ldin
gO
ld C
ity70
No
No
No
No
N/A
14Re
naiss
ance
Pla
zaO
ld C
ity1,
350
Yes
Yes
Yes
Yes
N/A
15Ge
orge
W. C
hild
s Ele
men
tary
Poin
te B
reez
e63
Yes
Yes
No
No
N/A
1632
01 R
ace
Stre
etPo
wel
ton
Villa
ge16
4N
oN
oN
oN
o1Q
201
6
1737
50 L
anca
ster
Ave
nue
Pow
elto
n Vi
llage
300
No
No
No
No
N/A
1819
11 W
alnu
tRi
tten
hous
e Sq
uare
350
No
No
No
No
N/A
19Bo
yd T
heat
re S
iteRi
tten
hous
e Sq
uare
238
No
No
No
No
N/A
20Pi
ers 3
4-35
Sou
thSo
ciet
y Hi
ll20
9N
oN
oN
oN
oN
/A
21So
Ko L
ofts
Sout
h Ke
nsin
gton
320
Yes
Yes
Yes
Yes
N/A
2224
01 W
ashi
ngto
n Av
enue
Sout
h Ph
ilade
lphi
a11
3Ye
sN
oN
oN
oN
/A23
9th
and
Was
hing
ton
Sout
h Ph
ilade
lphi
a70
No
No
No
No
4Q 2
016
24To
wer
Pla
ce -
Ph. I
ISp
ring
Gard
en15
0N
AN
AN
AN
AN
/A25
4224
Bal
timor
e Av
enue
Uni
vers
ity C
ity13
2Ye
sYe
sYe
sN
oN
/A26
4400
Che
stnu
tW
alnu
t Hill
150
No
No
No
No
N/A
27W
est P
hila
delp
hia
High
Sch
ool
Wes
t Phi
lade
lphi
a30
0N
oN
oN
oN
oN
/ATo
tal:
-7,
536
Not
e: N
ames
of s
pons
ors a
re n
o lo
nger
ava
ilabl
e to
subs
crib
ers u
nles
s the
y pr
ovid
e da
ta fo
r thi
s tab
le. I
f you
pro
vide
dat
a fo
r thi
s tab
le a
nd w
ish to
kno
w se
lect
sp
onso
rs' n
ames
, e-m
ail y
our r
eque
st to
Rac
helle
.Sar
mie
nto@
Delta
Asso
ciat
es.co
m.
Sour
ce: C
ompi
led
by D
elta
Ass
ocia
tes,
1717
K S
tree
t, N
W, S
uite
101
0, W
ashi
ngto
n, D
C 20
006.
Pho
ne: (
202)
778
-310
0. L
ast U
pdat
e: S
epte
mbe
r 201
5.
-Ga
rden
High
-Rise
Mid
-Rise
High
-Rise
High
-Rise
High
-Rise
Mid
-Rise
Mid
-Rise
Mid
-Rise
High
-Rise
Mid
-Rise
Mid
-Rise
Gard
en
Mid
-Rise
High
-Rise
High
-Rise
High
-Rise
High
-Rise
High
-Rise
High
-Rise
Gard
enM
id-R
iseM
id-R
iseHi
gh-R
ise
High
-Rise
City
of P
hila
delp
hia
Thir
d Qu
arte
r 201
5
Proj
ect T
ype
High
-Rise
High
-Rise
philadelphia sTaTisTical reporT
37DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLEr
Total Per Unit
CLASS A LOW-RISE APARTMENTS
1. Comparable #1 12/14 244 1989 $53,300,000 $218,443
Glen Mills, PA
Total/Average: -- 244 -- $53,300,000 $218,443
CLASS A MID-RISE/HIGH-RISE
1. Comparable #1 1/14 40 2009 $12,000,000 $300,000
Philadelphia, PA
2. Comparable #2 3/14 40 2009 $12,000,000 $300,000
Philadelphia, PA
3. Comparable #3 6/14 80 1970 $28,870,000 $360,875
Philadelphia, PA
4. Comparable #4 9/14 104 2012 $42,000,000 $403,846
Philadelphia, PA
Total/Average: -- 264 -- $94,870,000 $359,356
Note: Delta Associates no longer provides the name of each project listed above except to appraisal clients of the firm
and those who provide this type of transaction data to Delta. If you wish a list of project names and you qualify to receive
same, email your request to: [email protected].
Source: Compiled by Delta Associates, 1717 K Street NW, Suite 1010, Washington, DC 20006.
Phone: (202) 778-3100. Last update: 9/2015.
TABLE 3.10SUMMARY OF CLASS A APARTMENT BUILDING SALES
Philadelphia Metropolitan Area2014
Project Name/Location Date of Sale # of Units Year BuiltSale Price
philadelphia sTaTisTical reporT
DELTA ASSOCIATES | PhILADELPhIA CLASS A APArTmEnT mArkET rEPOrT | ThIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn38
SPONSORED BY KETTLER
Total Per Unit
CLASS A LOW-RISE APARTMENTS
1. Comparable #1 1/15 375 2005 $80,650,000 $215,067
Conshohocken, PA
2. Comparable #2 2/15 338 2004 $56,425,000 $166,938
Norristown, PA
3. Comparable #3 3/15 180 2013 $42,500,000 $236,111
Lansdale, PA
4. Comparable #4 3/15 116 2008 $17,200,000 $148,276
Lansdale, PA
5. Comparable #5 5/15 248 1989 $43,200,000 $174,194
Yardley, PA
Total/Average: -- 1,257 -- $239,975,000 $190,911
CLASS A MID-RISE/HIGH-RISE
1. Comparable #1 8/15 110 2014 $51,100,000 $464,545
Philadelphia, PA
2. Comparable #2 8/15 321 2013 $160,000,000 $498,442
Philadelphia, PA
Total/Average: -- 431 -- $211,100,000 $489,791
Note: Delta Associates no longer provides the name of each project listed above except to appraisal clients of the firm
and those who provide this type of transaction data to Delta. If you wish a list of project names and you qualify to receive
same, email your request to: [email protected].
Source: Compiled by Delta Associates, 1717 K Street NW, Suite 1010, Washington, DC 20006.
Phone: (202) 778-3100. Last update: 9/2015.
TABLE 3.11SUMMARY OF CLASS A APARTMENT BUILDING SALES
Philadelphia Metropolitan AreaThrough September 2015
Project Name/Location Date of Sale # of Units Year BuiltSale Price
4explanaTion of
geographic coverage
and MeThodology
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn 41
MARKET AREA COVERAGEDelta Associates currently surveys Class A garden and high-
rise apartment units in seven submarkets in the Philadelphia
region . The map on the following page depicts the geographic
areas covered in this report .
Delta Associates collects data on a statistically significant
sample of the Class A product in each covered submarket . A
total of approximately 18,000 units are surveyed at the end of
each quarter .
PRODuCT DEFINITION“Class A” product is defined by Delta Associates generally
as built in 1991 or later and offering a separate clubhouse,
decorated model units, two bedroom/two bath units, and a
large community amenity package most often including a
fitness center and swimming pool . The tenant pays gas and/
or electric in addition to telephone and cable television . The
projects are typically 200+ units except in submarkets where
quality product is scarce .
INTRODuCTION OF NEW, ACTIVELY MARKETING uNITSNew communities are added to submarket surveys as soon as
they begin pre-leasing units . The overall current asking and
effective rents and rents per square foot of gross leasable area
include these new communities . However, in comparing current
quarter rents to previous year rents, these new communities
are excluded until they have been marketing for one full year .
This is done so as to dilute the impact on rent rate increases
often associated with newly introduced product .
MeThodology
and glossary
FACE RENTFace rent is the asking rent for each unit, excluding any
concessions or rent specials given . Delta Associates quotes
the weighted average asking base rent for each sub-market –
the asking rent for a first floor unit without any premiums for
fireplaces, views, etc .
EFFECTIVE RENTEffective rent deducts from face rent any concessions or rent
specials for any unit type offered at a surveyed project . Typi-
cally, concessions are used selectively to lease weaker floor
plans or surplus units .
STAbILIzED VACANCY“Stabilized Vacancy” as used herein is the rate of “available
units” in stabilized properties . Once a property achieves 95%
occupancy, it is considered “stabilized” and says in our pool of
stabilized properties even if it falls below 95% at a subsequent
reporting date .
We obtain information on “available units” when conducting
our surveys . Obtaining the information this way may produce
several important differences from “vacancy” as reported in
financial statements . Simply stated the difference can be
characterized as:
• Delta’s: Available units to lease
• Financial statement: Economic vacancy
DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn42
SPONSORED BY KETTLERexplanaTion of geographic coverage and MeThodology
“Available units” is understated compared to “economically
vacant” by our exclusion of units occupied by dead-beat tenants
and units not available for lease, such as employee units and
model apartments . Our occupancy rate is overstated compared
to financial reporting by our exclusion of economically vacant,
on-notice units for which a lease to occupy in the future has
been signed . As compared to the “vacancy rate” as used in
financial reports, we estimate that the former reduces our
“available units” (vacancy rate) estimate by about 100 to 150
basis-points and the latter another 150 to 200 basis-points .
OVERALL VACANCY“Overall vacancy” is defined to include all physically vacant,
unrented units in all projects surveyed, including those
in actively marketing communities . Therefore, the overall
vacancy figures include new, unrented units still in initial
lease-up .
PLANNING PIPELINEThe planning pipeline includes projects in the advanced
planning stages . This pipeline, as defined here, does not
include all projects being planned . To be included on this list,
a planned community typically would have financing and
approvals in place . Some communities are included if Delta
Associates feels that financing and/or site plan approval are
imminent .
43DELTA ASSOCIATES | PHILADELPHIA CLASS A APArTmEnT mArkET rEPOrT | THIrD QuArTEr 2015 | nOT fOr rEDISTrIbuTIOn
SPOnSOrED bY kETTLErphiladelphia area subMarkeTs
7
5
6
1
2
3
4
Source: REIS, ESRI, Delorme, Delta Associates; June 2015
PHILADELPHIA AREAaparTMenT subMarkeTs
SubMARKETS1 . Chester Co ./Delaware Co .2 . Montgomery County3 . Bucks County4 . City of Philadelphia5 . Camden County6 . Burlington County7 . Mercer County