Newmark releases its 4Q22 Office Market Reports
Newmark Real Estate (Newmark) is pleased to release its fourth quarter 2022 Greater Philadelphia, Southern New Jersey and Delaware office market reports.
In the fourth quarter of 2022, Philadelphia experienced a slight uptick of workers returning to the office. As of December 2022, according to Kastle Systems’ weekly occupancy barometer, 41.5% of Philadelphia’s workforce have returned to the office, up from 40.7% in September of 2022. Despite the improvement since last quarter, Philadelphia still lags the current major metro average workforce return rate of 48.2%. Many Philadelphia area companies continue to operate under a hybrid work model to accommodate their employees. As Philadelphia heads into the winter months of the new year, rising cases of COVID-19 could continue to be problematic for companies trying to return their workers to the office more permanently.
The Southern New Jersey office market ended the fourth quarter on a busy note, which drove vacancies to new lows. Much of the activity was a combination of renewals and some relocations to higher-quality space. Downsizes and space givebacks were recorded; however, the deals completed in 4Q22 bodes well for solid occupancy levels moving forward. Inventory reduction derived from industrial conversions is helping right-size the market’s inventory. The sale of 3000 Leadenhall Road to The Carlyle Group will remove nearly 376,000 square feet of sublet space. Other conversion transactions are taking place; however, many are paused or being re-traded due to rising interest rates and changing economic conditions.
The Wilmington office market had a slow fourth quarter, as shown by absorption figures and recorded transactions. Many new leases projected to have 22Q4 occupancy slipped because of labor contracts and supply chain issues. In addition to an already-soft rental market, worsening public health conditions due to rising flu and COVID cases, along with the holidays, left the market flat. Sublease space reductions in the Central Business District (CBD) were observed, but sublet additions in Southern Wilmington erased gains for the entire market. As a result, quarterly absorption in the Wilmington office market was negative 12,921 square feet, with the CBD being the only submarket with positive absorption. Most of Downtown’s gains were due to the 15,136-square-foot lease signed by McDermott, Will & Emery at the Brandywine Building at 1000 N. West Street. This relatively slow quarter meant Wilmington ended 2022 with a year-to-date absorption of negative 166,270 square feet.