March 25, 2026

Multifamily transaction activity in Philadelphia gains momentum in 2025

Q4 2025

Philadelphia multifamily market overview

Greater Philadelphia's multifamily market posted its heaviest year of new supply in more than a decade in 2025, and the demand base held. Nearly 8,300 units delivered into a market supported by approximately 38,000 net new jobs, and vacancy finished 2025 slightly lower than one year earlier. The stress that emerged was concentrated and predictable. The Frankford-Kensington corridor posted a vacancy increase to 10.1% in response to the region’s heaviest share of new deliveries. Outside of a few soft spots, performance was mostly healthy. Class B vacancy ended the year at just 4.0%, reflecting continued renter demand for workforce housing amid persistent affordability pressures. The urban-suburban performance gap widened throughout the year, driven more by the impact of new supply than a demand decline. This trend was also reflected in rents; suburban asking rents rose nearly 3% annually against less than 1% growth in the urban core.

The local multifamily investment market recorded approximately $2.0 billion in transaction volume across 57 properties in 2025, with the deal count rising 39% over the prior year as the buyer pool broadened considerably. While aggregate dollar volume pulled back modestly from 2024, the increase in transaction counts reflects a market in which smaller private and regional buyers re-engaged alongside institutional capital, driving average deal size from roughly $55 million to $35 million. Activity was concentrated in Montgomery County, which led all submarkets with $531 million across 11 transactions, and the Philadelphia CBD, where six trades averaged $324,000 per unit. New construction assets commanded a significant premium over vintage product, averaging $335,000 per unit compared to approximately $240,000 for older garden and mid-rise properties.

Looking ahead:

Philadelphia's multifamily market enters 2026 at peak delivery volume, with approximately 9,000 units expected to be completed over the course of the year before deliveries slow considerably in subsequent years. Permitting has held relatively steady near 5,000 units annually since 2022 and is forecast to ease modestly in 2026, a gradual cooling that suggests the pipeline is thinning. A healthy labor market and a for-sale housing market that continues to price out a broad segment of would-be buyers should sustain renter demand at a pace sufficient to absorb remaining deliveries. As newly delivered product works through lease-up, vacancy is expected to ease while rent growth strengthens. Suburban submarkets, where new supply has been comparatively limited throughout the cycle, will likely lead that recovery.

Transaction activity is expected to remain elevated into 2026 as buyers increasingly underwrite to an environment where the current delivery cycle is peaking and the supply outlook beyond 2026 clears considerably. The repricing that weighed on deal flow through 2023 and much of 2024 appears largely complete, and with a pipeline of deals already on market or under contract, volume should hold near 2025 levels before improving further as additional rate cuts expand the buyer pool. Health care and life sciences employment growth, anchored by ongoing development activity in University City and at the Navy Yard, continues to reinforce demand fundamentals across the metro's strongest submarkets. For well-located assets in supply-constrained corridors, the combination of tightening vacancy, improving rent growth, and more favorable financing conditions point toward upward pressure on pricing as the year progresses.