The Philadelphia Building Industry Association is the largest building industry association in the state of Pennsylvania,” says Mo Rushdi, Managing Partner of River Ward Group and President of the BIA.“We have over 400 real estate development and contractor members.” The association has been in existence for decades, but its footprint and influence have expanded significantly in the last 15 to 20 years as the city’s housing market has changed. Rushdi himself wears multiple hats in the housing ecosystem. In addition to leading the BIA, he chairs the Philadelphia Housing Development Corporation (PHDC), a quasi-governmental nonprofit that serves as a clearinghouse for subsidies and housing programs across the city. Rushdi co-chairs the mayor’s business roundtable for construction and development, and chairs the Philadelphia Accelerator Fund, a $20 million fund now scaling toward $100 million that is designed to provide flexible capital to small and disadvantaged developers. That combination of on-the-ground development experience and policy-level influence gives Rushdi a rare, holistic view of how projects move from idea to reality in Philadelphia’s neighborhoods. A STABLE MARKET UNDER PRESSURE On a macro level, the story of housing and construction over the past decade is familiar: a long recovery from the 2008 financial crisis, followed by a surge in demand and rising prices leading into and through the pandemic era. For Philadelphia, the forces are the same, but the dynamics are different. “Philadelphia is, in general, a stable market,” Rushdi notes. “You don’t typically see sharp increases or sharp decreases, even in recessions, when it comes to pricing.” That stability, however, comes with a trade-off: development margins are tight. When construction lending is in the four-and-a-half to five percent range, projects can just barely “pencil out.” When interest rates climb to eight percent, entire deal stacks fall apart. He traces the turning point back to COVID.“From 2019 through 2022, we saw a big jump in construction costs, driven largely by supply chain issues. With those increased costs came higher prices on both the rental and for-sale side.” At the same time, the Federal Reserve reacted to inflation with the fastest interest rate increases in decades. That one-two punch hit developers particularly hard. “A project that might have required 25 to 30 percent equity now needed 50 percent or more, simply because the amount of debt that could be serviced at 8 percent was much lower than at 4.5 or 5 percent,” Rushdi explains. “So a lot of projects that were penciled out and were ready to go were just put on hold. That’s not a Philadelphia issue, that’s national, but the severity depends on your submarket.” 21 BUSINESS VIEW MAGAZINE VOLUME 12, ISSUE 12 PHILADELPHIA BUILDING INDUSTRY ASSOCIATION
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