At the end of each quarter, top analysts from JLL pull office insights for leading markets to form office highlight reports. Discover office trends impacting Philadelphia along with notable transactions in this short summary, pulled from the complete JLL Q2 2018 Office Report. Highlights include two impactful trends and the two biggest transactions of the year thus far.
Blocks Shuffle as Tenants Relocate
Q2 saw the continuation of two impactful trends in Philly’s commercial business district (CBD):
- Tenants are relocating to more efficient space.
- There is a shortage of high-quality space for the growing number of mid- and large- size tenants engaging the market in advance of lease expirations.
The result is the continuation of the recent trend of negative net absorption across the CBD. Vacancy ticked up slightly to 11.6%, but despite occupancy losses, asking rents held steady for Class B space and crept up slightly for Class A space.
Greater Philadelphia’s Biggest Deals of 2018
The western suburbs welcomed the two largest deals of the year-to-date, totaling half million square feet: AmerisourceBergen and CSL Behring. These deals will bring hundreds of new employees to their respective submarkets.
AmerisourceBergen selected Keystone Property Group’s SORA West site as its headquarters location, signing a 400,000 square foot lease that will allow the project to move quickly into construction. This is the first of several major proposals in the pipeline to move forward.
In King of Prussia, CSL Behring announced that it will occupy the entirety of 500 N Gulph Road, a 100,000 square foot building owned by Brandywine Realty Trust. The project is currently under renovation, so an early 2019 occupancy is anticipated.
Notable Stats in Philly
Leasing activity in Philadelphia surged in Q2 while other metrics stated flat. While absorption remains net negative for the year and vacancy is holding around 13.7%, the Class A segment is tighter at 10.5%, which helps explain last quarter.