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Despite consistent rent growth and setting a new Class A record asking rate, Center City office rents still a significant discount to most other U.S. markets

•As of the end of Q1 2018, Center City Class A office rents hovered just shy of $33 per square foot (FSG), setting a new record for Class A office rents in the city. However, despite relatively consistent positive rental rate growth since 2012, Center City office rents are still a significant discount to most other major U.S. markets. At $43.82 per square foot on average across 20 CBDs, Center City Philadelphia’s Class A rents are a full 25 percent lower than the national average.

•While this discount may seem like a competitive advantage to Philadelphia in the national corporate headquarters relocation game, low and slow-growing rents are a function of less robust demand for space compared to other markets. When accounting for business taxes in addition to rent, the full cost of occupancy in Philadelphia is, in fact, significantly higher than other markets, despite lower average asking rents. Tenants paying NNN rents and those with base years resetting in 2019 may be in for a surprise as assessed values that increased 38 percent over two years (on average) go into full effect, with corresponding increases in Use & Occupancy Tax. 

Source: JLL Research

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