The State of Our Market

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Urban Land Institute’s 2016 Emerging Trends in Real Estate Outlook recommends, “Look to key secondary markets.” And many are following this advice.

Statistics to consider:

  • Philadelphia notched $9 billion in office transaction volumes around the region in 2015, up 44 percent year-over-year.
  • Nearly 30 million square feet is currently under development across all asset classes.
  • More than 100,000 millennials have moved to the city since 2006, representing a 6.3 percent increase in share of population as of 2014.

Elements such as construction or redevelopment and the growth of the millennial population, among several others (multifamily, industrial, retail, etc.), currently drive investment strategy in Philadelphia’s commercial real estate environment.

How do these dynamics affect each sector?


  • Philadelphia is known for being a renter’s market and the city’s meds and eds institutions are retaining recent grads and attracting new talent – resulting in a wealthy, educated and younger workforce.
  • After several years of office-to-multifamily conversions, new Class A luxury properties are being built with features geared towards millennials, such as smaller square footage and more communal spaces.
  • Currently, 3,500 units are under construction – modest compared to fellow secondary city Atlanta, where 11,379 units are being built. A growing renter demographic and institutional interest is raising Philadelphia’s Class A pricing – recent sales averaged $645 PSF, while Atlanta’s average Class A sale is approximately $190 PSF for Q1.


  • Pennsylvania’s I-81/I-78 distribution corridor, which encompasses Central Pennsylvania, the Lehigh Valley and Northeastern Pennsylvania, is widely considered to be one of the U.S.’s top distribution corridors for warehouse and distribution centers, and a critical component in supply chain networks.
  • The market’s continued stability, highway infrastructure, abundant labor and logistical advantages makes it a target among leading industrial investors.
  • The market currently has 14 million square feet under construction, 74 percent of which is speculative. By comparison, Chicago, another industrial market known for development, has 15 million square feet under construction, approximately 50 percent of which is speculative.
  • Philadelphia’s rental rates are slightly lower than Chicago’s. Currently, Philadelphia’s Class A average asking rent is $4.57 PSF whereas Chicago’s average Class A rent is $4.79 PSF. Cap rates for Class A product within the I-81/I-78 Corridor range from 5.0 to 5.5 percent whereas Chicago’s Class A cap rates range from 4.75 to 5.75 percent.


  • Philadelphia currently has 2.2 million square feet of retail product under construction or renovation, largely dedicated to one massive mall redevelopment.
  • Center City’s The Gallery at Market East is currently redeveloping 1.5 million square feet into The Fashion Outlets of Philadelphia. The $325 million project is expected to open in 2018.
  • The majority of the day-to-day retail action is high-street, namely Walnut Street and an emerging Chestnut Street. Both streets are located near multifamily properties, host high-end national brands and command Class A rents at approximately $120 PSF.
  • In Atlanta’s high-street retail, which is primarily considered the Buckhead submarket, prices average Class A rent at $110 PSF, while rents in Denver’s downtown and Cherry Creek area high-street reach up to $70 PSF.

Learn about the other drivers and how they compare to similar markets here.