Top 5 Philly Real Estate Trends in 2018
Philly won’t slow down in 2018.
“We are very bullish on Philadelphia,” said Jerry Sweeney, CEO of Brandywine Realty Trust, at the Urban Land Institute’s Real Estate Forecast last week.
Sweeney was one of a few top developers and experts who spoke to some of the trends to watch in 2018 here in Philadelphia, from a new kind of workplace to a new kind of renter.
Here are five of the top real estate trends to keep an eye out for come 2018.
1. More apartment concessions to sweeten the deal
Philly is expected to see a lot of new construction deliver in 2018, with multifamily residential builds making up a good portion of it. So as all of those apartments come online, expect to see a lot of these buildings offering concessions—think one month’s free rent—to entice renters to fill up their vacancies, says Gilchrist.
The luxury rental market is most likely to push this, since, simply put, they’re just too expensive for the average Philly renter to afford. This high-end market averages about $3 per square foot—not many people can afford paying $3,000 a month for a 1,000-square-foot apartment.
As Gilchrist points out, when there are hundreds of older Philly rowhomes available for rent at a much lower price point, luxury apartments are going to have to really woo renters with deals to convince them to live in their building.
2. The tale of two renters: Millennials and baby boomers
Talk of millennials in Philly isn’t going to go away anytime soon. As long this group keeps moving into Philly in droves (and puts down more permanent roots here), apartments will still keep coming online.
But there’s another type of renter that developers have started to cater to: baby boomers. There’s been a lot of talk of empty nesters downsizing from their suburban mansions and moving into condos and homes in Center City. But research shows that a lot of adults in this age group are actually transitioning from buyers to renters at a faster rate than millennials.
Bradley J. Korman, co-CEO of Korman Communities, says this means that developers now have to market their communities in two very different ways to attract these different types of renters.
3. A boom in coworking and shared work spaces
At last count, coworking spaces like WeWork, Benjamin’s Desk, and the Yard made up 527,000 square feet of total office space in the Central Business District (CBD). While that’s a small percentage of the city’s total office space, the numbers show this type of workspace could account for as much as 30 percent of office space in the country years down the road. “Coworking will be a huge driver,” said Lauren Gilchrist, vice president of research at JLL Philadelphia.
Philly is already home to a plethora of coworking spaces, and there are a bunch more in the pipeline, including Bond Collective at Suburban Station and Spaces in the old Hale Building. Both are set to deliver next year.
Why are these type of offices so attractive? The flexibility these spaces allow is a big factor, but they also come with amenities like outdoor space, kitchens, and host special events. Gilchrist says to “expect vanilla, un-amenitized Class A trophy office space to struggle.”
4. A different kind of shopping experience
Whoever predicted the end of malls was wrong: They’re not dead, just different. While e-commerce has no doubt caused a major shift in the typical shopping experience, brick and mortar shopping is still the most popular way for folks to consume, and it doesn’t look like people are going to stop shopping in malls anytime soon.
What will change is what malls offer, says Gilchrist. Her research shows that food and beverage is the most popular renovation strategy for malls, making up an astonishing 40 percent, followed by tenant upgrades, entertainment, and multifamily residential features.
PREIT’s redevelopment of the Gallery Mall is a prime example of what Philly should expect with the new shopping experience. After originally promoting itself as the Fashion Outlets, months later it reemerged as the Fashion District of Philadelphia, with an eye toward restaurants and entertainment. Along with flagship stores like H&M, the Fashion District will offer things like Market Eats, a food hall of sorts, as well as a fancy movie theater with reclining chairs with the option to order food and drinks.
PREIT is banking on its redevelopment being one of the most successful mall redevelopments. “We see it as a project that’ll be the premiere urban retail centers in the country,” said CEO Joseph F. Coradino.
5. Philly will have some stiff nearby competition
The desire to live and build in Center City and Philadelphia in general isn’t going to become any less popular next year. But Gilchrist says that by the looks of it, the ‘burbs are making a comeback, too.
“Expect mixed-use suburban office, multifamily, and retail to peak up steam,” Gilchrist said in her presentation.
There are some suburbs in particular to keep an eye on, starting with King of Prussia. The town has seen $1 billion in development in recent years, including a revamp of the famous King of Prussia Mall and the nearby KOP Town Center that is now home to tons of retail, townhomes, and apartment developments. And although it’s many years down the road, the goal to extend the SEPTA Regional line here has gained recent traction.
On the Main Line in Bala Cynwyd, a developer has undertaken a $100 million master plan to redevelop the town’s historic corridor with new retail, restaurants, and apartments.
And while Camden isn’t a suburb, it is much smaller compared to Philly, but also its closest competition. Liberty Property Trust is responsible for all of the waterfront development that’s happening in Camden on the Delaware River, where there is 1 million square feet of mixed-use development under construction.
“That town finally has momentum that’s gaining traction,” said CEO and president William Hankowsky. “I would watch Camden.”