Market Activity Continues Amid COVID-19 Disruption, Long-Term Legacy is Unknown
Philadelphia, PA (July 10, 2020) — Newmark Knight Frank (NKF) has released its second quarter 2020 office reports for the Philadelphia CBD, suburbs, Southern New Jersey and Northern Delaware. Office market activity slowed substantially during the second quarter due to unprecedented circumstances caused by the global COVID-19 pandemic; however, most markets experienced net positive absorption and office leases were still signed; among them, numerous expansions.
In the Philadelphia CBD, expansions within resilient and growing industries such as life sciences drove positive market activity in the second quarter. Net absorption measured approximately 70,000 square feet, dominated by two transactions: Spark Therapeutics leased the 54,000-square-foot building at 3000 Market Street, and Passage Bio signed to expand from 9,000 square feet at Two Commerce Square to 37,500 square feet at One Commerce Square. Life sciences momentum in the city of Philadelphia and its effect on current and future demand for office/lab space cannot be overstated. While many requirements for office space in the market have been put on hold since the pandemic began, approximately 340,000 square feet of new space requirements have emerged and of that total, over 75 percent is related to life sciences firms. Vacancy in University City, the region’s premier life sciences submarket, fell to 7.5 percent in second- quarter 2020. For lab inventory in the submarket, however, the vacancy rate is hovering around zero according to NKF Research’s 2020 Life Sciences: National Overview and Top Market Clusters report. NKF Senior Managing Director Jack Soloff noted, “The confluence of life sciences demand and a dearth of available, existing lab inventory is driving some office owners to consider converting portions of their buildings into lab space.”