With a Slow Q3 Behind us in the Philadelphia CBD, Office Leasing Needs to Pick up Before 2018

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Philadelphia CBD VacancyDespite a sluggish third quarter in the Philadelphia CBD, our office market is about to reach a tipping point.

After falling 2.4% from Q2 levels, rents stabilized around $30 per square foot throughout Q3. This subdued market is notable, considering the city and region posted their strongest job growth in years and the current apartment boom has continued unabated.

All this to say, Q4 will be a decisive one. More than 700,000 square feet of unclaimed Class A space will deliver over the next 12 months and the market will have to pick up to avoid a spike in vacancy.

JLL’s verdict? The current slowdown may be a natural ebb before a potentially remarkable year for the Philadelphia CBD. More than 1 million square feet of retail, over 2,600 new apartments, and more than 1,000 hotel rooms – not to mention an additional 1 million square feet of office –  will be delivering in tandem with an influx of thousands of new Comcast employees. With most of this space up for grabs, tenant and talent response will be a decisive factor in what comes next in the CBD market.

For the full report, visit JLL Philadelphia.

Notably, leasing really started heating at the national level. Across the US, leasing volume reached 62.4 thousand square feet., the highest figure in more than two years.

Philadelphia CBD Leasing

Leases larger than 250K square feet drove much of the activity, totaling more than 10.9 million square feet, and representing 17.5 percent of all deals done in 2017.

 

Despite increased leasing activity, vacancy is rising as new deliveries outpace absorption. We expect vacancy to increase further over the next few quarters as more than 75.4 million square feet of new product will deliver to the market through 2018, of which only 48.7 percent is pre-leased.

Philadelphia CBD Vacancy 2

You’ll find the full report here.