Activity in the Philadelphia CBD Picks up in the Fourth Quarter

Philadelphia, PA (January 19, 2018) — Newmark Knight Frank (NKF) released its fourth quarter 2017 office reports for the greater Philadelphia region. The reports detail how the Philadelphia Central Business District (CBD) reported positive absorption in the fourth quarter, after downsizing and fewer tenants relocating from outside the market kept CBD vacancy at high levels for most of the year. Suburban Philadelphia performed strongly in 2017, but market fundamentals weakened in both the Southern New Jersey and Delaware office markets.

Year-over-year, the CBD reported a 160 basis point increase in vacancy, which closed the fourth quarter at 13.1 percent. The large blocks of space returned to the market were a result of tenants reworking their floorplans to be more efficient. Over the past twelve months, PNC, Verizon and Deloitte gave back space in the CBD. In addition, the Children’s Hospital of Philadelphia vacated 226,000 square feet at 3535 Market Street, but only to relocate to an owned property across the river.

The amount of Class A space returned to the market pushed Class A vacancy up 230 basis points from the fourth quarter of 2016 to 12.5 percent. While providing more options for tenants seeking premium space, it slowed rent growth for non-trophy Class A properties in the second half of 2017. Sid Smith, NKF executive managing director, said, “The economy is strong and after a brief pause in activity, there has been an increase in interest from tenants wishing to relocate from outside of the market to the CBD.”

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