What's Holding Philly's Apartment Development Back
The Philadelphia apartment market is hotter than it's been in years, with strong demand for new product--but there's a high cost to develop that product, according to our speakers at Bisnow Philadelphia's Multifamily Take Off at the Sheraton Philadelphia Downtown this week.
As in a lot of places, Millennials are driving a lot of leasing activity in both Downtown and suburban apartment markets, our speakers note. Downtown's no surprise, but it's also true--contrary to conventional wisdom about Millennials--that many of them want to live in a suburban location, either for convenience (near work) or because it's cheaper.
Millennials might not be the only driver in leasing apartments, since empty-nester Baby Boomers are also interested again in city living, our speakers note. But Millennials will be the driver for a lot longer. In some ways, that generation is only now finding its footing after the recession forced many to live at home longer than their parents ever did, or to double up. So they'll be forming households for many years to come. Bozzuto Construction president Mike Schlegel and BLT Architects principal Michael Ytterberg, who moderated.
Construction costs are making developments harder to pencil. There are some coping strategies for developers, though, such as wood-frame construction, which is less expensive than other material, and a green option, since a lot of places--Pennsylvania included--are being reforested. Modular construction, such as modular bathrooms being dropped into new developments, is a possibility, though it's limited in Philadelphia so far. Snapped: Barzilay Development CEO Alon Barzilay and WoodWorks-Wood Products Council senior national director Scott Lockyear.
Rising rents are an issue for would-be city apartment dwellers. As a result, units are becoming smaller, especially in the city, and there are a lot fewer two-bedroom apartments. New development is heavy on studios and one-bedroom units. Lowe Enterprises VP John Gaghan, Equus VP Greg Curci, and RSM partner Beryl Simonson, who also moderated.