Demand for Studio Units Face Rising Vacancies

Philadelphia’s rental market is showing clear signs of changing tenant preferences. While demand for one- and two-bedroom apartments remains high, studio units are facing higher vacancy rates, signaling a shift in renter priorities. This trend has been influenced by recent waves of construction and evolving lifestyles.

One- and Two-Bedroom Apartments Still Lead the Market

Over the past several years, one- and two-bedroom units have consistently attracted the majority of renters in Philadelphia. Since 2020, developers have introduced nearly 31,000 one-bedroom units and around 18,300 two-bedroom units—representing over 80% of all newly delivered apartments. This has caused vacancy rates in these categories to inch upward, with one-bedroom units seeing a 2% increase in vacancy and two-bedrooms rising by just under 1%.

Despite the increase, two-bedroom apartments currently have the lowest vacancy rate in the market, at approximately 6.7% as of early 2025.

Tenants Prioritizing Space and Flexibility

Smaller units, especially studios, are losing appeal as more people seek homes with additional space—partly driven by the continued popularity of remote work and hybrid schedules. Studios typically lack the flexibility needed for a home office setup, making them less practical for many renters.

Affordability is another key factor. With average rents in Philadelphia increasing by over 20% since 2020, more tenants are opting to split costs with roommates. The average monthly rent for a studio is around $1,370, while a two-bedroom unit averages nearly $2,000. Splitting the rent on a two-bedroom could reduce individual costs by nearly a third.

As a result, studio apartments have experienced the largest jump in vacancies—rising from 7% to over 10% between 2020 and early 2025.

Growing Interest in Larger Units

Larger rental units, including four-bedroom apartments, are starting to see increased interest. These units may appeal to renters who are delaying home purchases or looking for more economical shared living arrangements. Since 2020, four-bedroom vacancies have decreased slightly, despite minimal new supply. Only 68 new four-bedroom units have entered the market in the last five years, helping keep vacancy rates stable.

Developers Responding to New Market Realities

These developments indicate that while smaller units may face over-supply, there could be untapped opportunities in larger apartment types or more flexible floor plans. Some developers are already adjusting by designing units that offer better home-office accommodations or are more suitable for shared living.

As rental demand continues to shift, developers and investors who stay ahead of these trends will be better positioned to succeed in a changing housing market.