3 Months Free And ‘Category-Killer’ Amenities: What It Takes Now To Fill Philly’s High-End Apartments

For Philadelphia renters considering a move to a new upscale building, there are options for bargains all along Broad Street. 

From Tower Place Apartments, at Broad Street and Spring Garden St., down to the 777 South Broad building, both older and newer developments are touting at least one month free and ultra-luxe amenities, from on-site movie theaters to cocktail lounges, to capture a pool of tenants that is growing more slowly than new properties are opening up.

A glut of new builds has landlords of the city’s most expensive projects going all out to get people in the door. And with thousands of additional units on the way, the competition could get even more intense. 

Deep discounts and finding ways to serve up more bang for the tenant buck are becoming par for the course at the most expensive units in the city. According to Alterra Property Group Senior Vice President Mark Cartella, multifamily owners and operators must be prepared to absorb costs to get buildings filled.

“We're talking about sometimes a two-year stabilization period as opposed to a six-month and 10-month stabilization period” for new deliveries, Cartella said at Bisnow's Philadelphia Construction and Development Summit earlier this month. “And rent growth, too, is also moderating here, and ... depending on where you are in location, could be anemic or even negative.”

Luxury rents across the metro grew at a meager 0.3% over the past 12 months, according to regional data provided to Bisnow by CoStar. Areas with some of the most new upscale units, like Northern Liberties, Fishtown and East Kensington, are faring even worse. Average luxury rents in Northern Liberties dropped 1.3%, while Fishtown and East Kensington notched 3.6% declines.

Ads for new properties tell the story. The brand-new Hagert and York in Kensington is giving away three months of free rent, while Oxford Flats in Fishtown is attempting to lure new residents by offering a choice between discounting rents by $150 per month or knocking two months off the top in the first year.

The deals are coming as high-end properties grapple with a near 11% vacancy rate overall, a figure that goes up the newer a building gets, CoStar data shows. Just 45% of the 7,930 units across the 62 luxury buildings completed in 2023 have been filled.

That's likely because so many of them flooded into the market at once. Luxury units made up the vast bulk of the 11,000 apartments added over this past year, per CoStar. An additional 16,000 luxury apartments are scheduled to be completed within the next two years, including Alterra's plan to convert a former law firm building into hundreds of apartments at 1701 Market St. in Center City.

Like many other cities, Philadelphia benefited from low interest rates and pandemic-era migration that made building more multifamily in the city an attractive proposition. But fuel was dumped on the flame by the ending of the city's 10-year tax abatement in January 2022, with the Philadelphia Department of Licenses and Inspections issuing building permits for 26,116 residential units in the months leading up to the change.

“When rates are low and financing is cheap, developers build. Philadelphia is no different from many markets that are in a bit of oversupply,” said Alan Feldman, a lecturer on real estate development at The Wharton School's Zell Lurie Real Estate Center at the University of Pennsylvania. “A lot of what is still being delivered was planned three to five years ago.”

The result is that developers must now be more creative and generous. Post Brothers’ Goldtex Apartments building a few blocks east of Broad Street offers two months’ free rent as well as a $1,500 rent credit for healthcare, education and other service workers. Its brand-new Piazza Alta building, two miles north in Northern Liberties, is offering two months of free rent on select units and a $1,000 rent credit to such industry workers.

To get tenants in the door, “category-killer amenities” are part of Post Brothers’ philosophy, Sarina Rose, senior vice president of development at Post Brothers said during Bisnow’s event.

In addition to bars and entertainment offerings, those amenities include coworking spaces, infinity pools, cigar and billiards rooms, on-site dry cleaning, electric vehicle charging, and events and retail on-site, including farmers markets.

Despite the perks and free month offers, most landlords are trying to keep actual rent cuts to a minimum. Post Brothers made it clear in a follow-up email after this story published that it was offering only “specific, targeted concessions on select units as a marketing enticement” and that the majority of its unit types were being offered without concessions.

Luxury rents are still not cheap in Philadelphia, rounding out to about $2,000 per month compared to the average $1,435 monthly for properties across all categories, according to CoStar. 

Developers in general would rather keep effective rents as high as they can, offering a temporary concession and ever-more competitive amenities as the supply imbalance works itself out, said Benjamin Keys, an economist and the associate professor of real estate at The Wharton School. 

That play helps get new tenants in the door without prompting current residents to ask for monthly discounts to boot, he said.

“Another reason is the ‘power of free,’ the idea that some tenants may be especially responsive from a marketing standpoint to the idea of getting something for free and value that disproportionately more than a rent reduction of the same size,” Keys said.

However, concessions still signal a soft market for landlords, Keys noted. “Implicitly, this means that renting is becoming cheaper when you think about the overall cost for the year.”

That is likely to continue to be the case through the remainder of 2024 and into next year, especially with another large wave of high-end product expected to deliver in the months ahead, market experts say. But the number of permits issued in the wake of the tax abatement's end has plummeted. Fewer than 1,000 were issued in January, according to the most recent figures from the U.S. Census Bureau.

For some, that signals breathing room for the market to absorb the excess and start 2025 on firmer ground.

“I wouldn’t worry,” The Riverwards Group Managing Partner Mo Rushdy said. “That glut of apartments right now is gonna be solved by May 2025, let’s say.”

UPDATE, MARCH 26, 11 A.M. ET: This story has been updated to include an emailed statement from Post Brothers.