C&W Philadelphia Office Market Report Q3 CBD, Suburban Markets Turn in Positive Absorption

PHILADELPHIA - Oct. 19, 2017 - PRLog -- The Philadelphia Central Business District (CBD) overall office vacancy rate increased marginally year-over-year during the third quarter of 2017, while declining vacancy in suburban office buildings continued to push rents higher there, according to Cushman & Wakefield (http://www.cushmanwakefield.com/). The commercial real estate services firm's Philadelphia research team released its third-quarter 2017 Office Marketbeat reports for the region.

Philadelphia CBD Market

"The increase in vacancy can be attributed to new available Class B space in the East of Broad submarket, as well as the renovation completed earlier this year of the Family Court building at 1100 Ludlow St., where more than 100,000 square feet remains available," Cushman & Wakefield Research Manager Jared Jacobs said. "The Philadelphia area economy remains stable with regional unemployment declining during the third quarter to 4.7 percent." Jacobs noted this reflects 16,700 new professional and business services sector jobs and 15,400 new jobs in education and health services in the Philadelphia Metropolitan Area during the 12 months ending September 30, 2017.

The overall vacancy rate for the Philadelphia CBD ended the third quarter at 10.7 percent, a year-to-year increase of 30 basis points. Overall asking rents declined slightly to $29.32 per square foot following the second quarter's increase to $30.07. Year-to-date absorption remained positive at 92,752 square feet due to more than 1 million square feet in leasing activity in the West of Broadway submarket this year.

Renewals drove leasing during the third quarter in the CBD. Morgan, Lewis & Bockius renewed for 98,180 square feet in 1801 Market St. Baker Tilly's renewed its lease for 49,561 square feet at One Liberty Place, and Medical Guardian renewed and expanded to 35,433 square feet at 1818 Market St.

Brandywine Global Investment Management's 88,713-square-foot lease at 1735 Market St. was the biggest new lease of the quarter. New York-based Nightingale Properties acquired Centre Square West and East Towers from Equity Commonwealth for the largest investment sale of the quarter. Nightingale paid $328 million for the 1.76 million square feet in the two towers, or $186 per square foot.

Cushman & Wakefield's Philadelphia research team anticipates that vacancy is likely to rise over the next six-to-12 months as Comcast completes its 1.3-million-square-foot headquarters at 1800 Arch St. in early 2018 and moves there, vacating other buildings within the Philadelphia CBD. The renovation to One Franklin Tower would bring nearly 215,000 square feet of office space onto the market starting in the current quarter.

Philadelphia Suburban Market

Overall vacancy in the suburban Philadelphia office market declined to 11.1 percent in the third quarter of 2017, down 140 basis points year-over-year. Overall asking rents for all classes increased by 2.2 percent during the past year to $24.75 per square foot.

"Class A rates experienced the largest increase, 3.1 percent year-over-year, to an average rate of $26.40 per square foot," Jacobs said. "Overall the suburban Philadelphia office market turned in 345,665 square feet of positive absorption during the third quarter, although year-to-date market absorption continues to lag 2016."

Philadelphia Insurance Companies renewed its lease for 285,000 square feet at One Bala Plaza, in Bala Cynwyd, and State Farm Insurance extended its lease for 272,523 square feet at One State Farm Drive in Concordville. SofterWare, Inc. signed the largest new lease of the quarter, taking 45,484 square feet at 601 Office Center Drive in Fort Washington.

The Marketbeat Report forecasts growth in asking rents for all office classes in suburban Philadelphia at an annual average of 1.9 percent over the next five years. With just 171,232 square feet of new construction delivered this year and no new speculative construction is in the pipeline, the Cushman & Wakefield Philadelphia research team expects vacancy to remain in a downward trend for six- to-12 months.

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About Cushman & Wakefield

Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. 2017 marks the 100-year anniversary of the Cushman & Wakefield brand. 100 years of taking our clients' ideas and putting them into action. To learn more, visit www.cushmanwakefield.com or follow @CushWake (http://www.twitter.com/cushwake) on Twitter.

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