If you’re examining Philadelphia’s Q1 office activity, published by JLL this April, it seems that the CBD may be experiencing a calm before the storm:
- Absorption remained sluggish due to the prevalence of small deals, modest tenant expansion, and key departures such as Dow from 100 Independence.
- Approximately 750,000 square feet remained available in recently delivered or under construction buildings, expanding quality large block options.
- The city’s newly launched Gateway Philly program targets established suburban companies with incentives to open CBD outposts. If successful, this may accelerate absorption and tee up bigger moves in the future.
- It is also certain that leasing velocity will pick up steam in 2017: millions of square feet are up for renewal, and local behemoths including Comcast and Jefferson are in expansion mode. Plus, after many delays, East Market’s 1100 Ludlow will open in Q2, with retail and residential components not far behind.
Meanwhile, in the suburban submarkets, large blocks and new amenities are proving to be magnets for relocation. Landlords – specifically those with renovated product – are feeling confident as:
- Cost-conscious tenants are hopping around the PA suburbs searching for new amenities.
- Suburban rents are increasing due to retrofitting of older, Class B spaces, creating quality, value-oriented options for tenants.