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Philadelphia is the second most affordable Northeast office market for tenants interested in new construction

  • ​​Tenants almost always pay a premium for new construction nationally, but the gap between rent in existing buildings and new deliveries varies widely from place to place.  In reviewing a list of major markets that would appeal to a large occupier, we found an average premium of 34% for new construction space compared to existing Class A space. Not surprisingly, New York shows the highest differential, with a 74.4% premium for space in new projects, including Hudson Yards. Labor costs contribute to higher premiums in markets that require union construction, such as New York, Boston, and Chicago.

  • Why bother paying the premium? Large tenants can improve productivity with more efficient floor plates, natural lighting, newer HVAC systems, and cost savings from lower operating expenses at new buildings. Additionally, tenants typically require less space in a more efficient building, driving down occupancy costs.

  • For tenants considering the Northeast Corridor, Philly is a bargain: new construction here is comparable to existing Class A in Boston, and well below the going rate for existing space in New York and Washington. Only Newark is a bigger bargain. Of course, cost is not the sole factor, but it is a key consideration in addition to access to talent, housing for employees, and other incentives for selecting a major expansion site.

Source: JLL Research

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