While the stagnant economy is hurting sales in many industries, it is likely contributing to a bonanza in multifamily building sales in the Philadelphia area this year. In fact, hopeful landlords seem to be gobbling up buildings to rent them as apartments or sell them as condominiums. This is evident both in Philadelphia and its suburbs.
According to Christine Espenshade, senior vice president for
capital markets at Jones Lang LaSalle Realty, 2011 multifamily sales have already set a record in the Delaware Valley, with a couple of months left in the year. Espenshade reports that sales have already hit $410 million. Yet, with two months remaining in the year, she predicts sales will touch $500 million. Compared to these figures, the $150 million in multifamily sales in 2010 seems downright paltry.
There are a number of explanations for this explosion in multifamily sales. Espenshade cites a durable growth of rent in the Philadelphia-area, a glut of new supply of apartments and condos, and an educated buyer’s market. Additionally, “With the availability of financing to purchase assets through Fannie Mae and Freddie Mac, investors can borrow sufficient capital for good, long term investments,” says the senior vice president. Finally, one of the more sobering explanations is that more Philadelphians are renting because they can no longer afford to own a house.
Philadelphia’s recent uptick in population bodes well for multifamily sales in the city. Espenshade confirms that a growing number of people are looking to rent apartments or purchase condos in the city because of its retail scene, colleges and universities, and varied employment market. However, this exponential growth isn’t limited to the city. Interestingly, Jones Lang LaSalle says there have more multifamily purchases in the suburbs. A possible reason for this is the sheer size of the Philadelphia Metropolitan Statistical Area (MSA), which includes Camden and Wilmington.
The forecast for multifamily sales remains strong for 2012. Espenshade says rents will continue to rise next year, which should make multifamily investing more profitable. She also sees both private and institutional entities rushing to become involved in the multifamily market next year, which would be a repeat of this year. Most importantly, without any strong signs of economic improvement next year, more and more people likely won’t be able to afford to buy their own home.
Source: Christine Espenshade, Jones Lang LaSalle
Writer: Andy Sharpe