Super Bowl Multifamily Markets – Can Philly Beat Boston?

Super Bowl LII is approaching fast with the New England Patriots, last year’s champs, vying with the high-flying Philadelphia Eagles this coming Sunday.

Both teams had a spectacular season and play-off performances. The Patriots are the clear favorites, but Eagles fans discount the New England hype.

Ahead of the big game, we have conducted our own analysis for the Super Bowl, assessing multifamily markets for the home cities of both Super Bowl teams. Here’s how the competition plays out…

1st Quarter – Size Matters

The contest starts off with a test of size and strength and not the finesse of star quarterbacks Tom Brady and Nick Foles. Contrary to popular knowledge, Philadelphia is the larger metro by more than one million people and scores a touchdown on this account. When it comes to renter households, Boston has the edge with both a higher percentage of renter households and the larger inventory of multifamily rental units, thereby scoring two field goals.

End of first quarter: 6-7 Philadelphia.

2nd Quarter – Economic Growth

Offense matters in the second quarter with Patriots’ tight end Rob Gronkowski snagging a beautiful pass from Tom Brady to score an early Q2 touchdown. This touchdown reflects Boston’s impressive job growth rate of 2.0% vs. Philadelphia’s 0.8%.

On the return drive, the Eagles move the football downfield for kicker Jack Elliott to complete a field goal based on Philadelphia’s phenomenal “Eds and Meds” infrastructure and future growth prospects. As Super Bowl commentator and CBRE research guru, Ian Anderson, points out: “Boston is no slouch for the ‘Eds & Meds’ sector, but Philadelphia’s expansion in recent years has been off the charts.”

The teams battle it out with the HQ2 selection—both Boston and Philadelphia have been selected for the short list. Boston has been considered a favorite from the beginning of the process; however, inclusion on the short list for Philly confirms how far the city has come in creating a cool urban and business environment that is attractive for corporate relocations; a field goal is duly kicked on this account.

Halftime: 13-13

3rd Quarter – The Big 4: Vacancy, Supply, Demand, Rents

Despite the inspiring half-time pep talks from coaches Bill Belichick and Doug Pederson to step up the offense, the defensive lines outmatch the offense with no scoring for most of the quarter. Boston and Philadelphia are evenly matched in vacancy, with both having relatively low rates (4.3% and 4.5%, respectively) and stable vacancy conditions. On a hand-off from Eagles quarterback Nick Foles to running back Corey Clement, Philly moves the ball down into field goal range, and then, on the next play, scores a field goal based on the higher demand-to-supply ratio.

In the late third quarter, both metros exhibit strong offense with relatively healthy multifamily demand. The teams are evenly matched in terms of their demand-to-inventory ratio. Similarly, construction is active in both markets, and the metros are also evenly matched in their supply-to-inventory ratios. There’s no scoring from supply or demand.

In the quarter’s closing minutes, Brady engineers yet another touchdown for Boston’s much higher rents than Philadelphia. As time runs out in the third quarter, team defenses tighten and neither club advances far enough to score based on their small rental rate declines in 2017.

End of third quarter: 21-16 Boston

4th Quarter – Investment Appeal

The game intensifies in the final quarter where investment is the focus. The Patriots score first on a long pass from Tom Brady to wide receiver Danny Amendola due to Boston’s superior 2017 investment volume. The Eagles quickly retaliate with a dramatic drive that culminates in a touchdown as running back LeGarrette Blount carries the ball into the end zone. The score is based on Philadelphia’s 2017 investment volume which more than doubled that of the prior year.

The confidence in the Boston multifamily clearly comes through in the final minutes of the game. Investors are happy to acquire Boston multifamily assets at high prices and low yields. Brady ices the game with his fourth and final touchdown based on investment cap rate pricing.

As Suzanne Duca, CBRE research guru for Boston concludes, “We have a lot of respect for Philly—they’re an impressive competitor—but it’s always tough to compete with the consistent superior performance of Boston.”

Final: 35 – 26 Boston

By Jeanette Rice, Americas Head of Multifamily Research, CBRE.