Multifamily investors in Southeast Pennsylvania are wading through a difficult mix of hyper-local market constraints and limited access to capital amid broad economic uncertainty.
Entitlement issues in the suburbs and oversupply in the city have joined forces with high interest rates and ballooning construction costs to hamper multifamily development across the region.
“We think we’re sort of in year three of a commercial real estate recession,” GoldOller Real Estate Investments CEO Jake Hollinger said during Bisnow’s Philadelphia Multifamily Summit Thursday.
Bisnow/Noah Zucker
Construction underway at the AVE Navy Yard apartment complex in South Philadelphia
While the region’s multifamily market had a 94% occupancy rate at the end of last year, TitleEQ principal Matt Einhebe expects just 5,300 units to be delivered in 2025, down from the roughly 13,000 recorded in 2024.
“We’re in a transitional market,” he said. “Good deals are harder to come by.”
Chilled capital markets are partly attributable to stubbornly high interest rates and the Trump administration’s tariff policies, panelists said.
“Our costs of borrowing have doubled, if not more than that” since the onset of the pandemic, GMH Communities Chief Development Officer Stephen Behrle Jr. said.
That environment led GoldOller away from multifamily financing and into the property management sector over the past two years.
“The majority of what we’re focused on is receivership,” Hollinger said. “We’re looking at the distressed market pretty closely.”
Hollinger sees lots of opportunity there. But the owners of struggling multifamily properties aren’t necessarily letting them go at a price that makes sense for value-add developers.
Bisnow/Noah Zucker
ECBM’s Gloria Forbes, Mosaic Development’s Maria Sourbeer, Toll Brothers’ Bryan Oos and CLA’s George Kotridis
“It seems like there’s a big gap between what the market is saying and where owners are looking to trade their assets,” BKP Development Group Managing Partner Bryheim Murray said.
“The kick the can down the road phenomenon continues,” Hollinger said.
Some root causes of the multifamily struggle in greater Philly are deeply local.
A wave of apartment projects washed over the city in recent years as developers raced to beat the expiration of a tax abatement program in 2021. High supply has led to low competition for units, flat rent growth and the rise of concessions in the leasing process.
Collar counties have the opposite problem. Despite high demand for rentals, multifamily construction has frequently been hampered by cumbersome municipal review processes.
“There’s no scarcity of land, but getting entitlements is a problem,” Toll Brothers Regional Director of Acquisitions and Development Bryan Oos said.
Bisnow/Noah Zucker
GMH Communities’ Stephen Behrle Jr., BKP Development Group’s Bryheim Murray, GoldOller’s Jake Hollinger, Love Communities’ Mark Thomson and TitleEQ’s Matt Einheber
South Jersey has a leg up on the Pennsylvania suburbs in this regard after the Garden State streamlined its affordable housing development process last year.
“On the Pennsylvania side there’s no corollary to that,” Oos said. “Pennsylvania has not historically had the same affordability problems, but as a result there’s no mechanism in place.”
Even if developers can get land and all their entitlements in order, rising construction costs caused by a labor shortage and the Trump administration’s tariffs whiplash have presented another major hurdle in recent months.
But the market might be turning a corner on that front, Behrle said.
“We’re seeing certain material costs decrease,” he said. “Labor costs in a lot of markets are starting to come down.”
Bisnow/Noah Zucker
Toner Architects’ Ian Toner, Hankin Group’s Becky Reeves, Toll Brothers’ Yvette Stewart-Glimp and Luxer One’s Pam Lewis
Behrle added that many subcontractors are anxious for work as construction activity tapers off. He also had some optimism about the future of capital markets.
“We’re starting to see some light at the end of the tunnel,” Behrle said. “We have seen a lot of our lenders come back into the space.”
The lack of new construction starts across greater Philly in recent years could lead to pent-up demand down the line.
“I actually think it’s a great time to put a shovel in the ground because there’s going to be a lull in new construction,” Hollinger said.