Philadelphia CBD leads the region in overall office asking rental rate growth
January 31, 2019
- In comparing the change in asking rental rates across the region since 2015, the CBD has led the market all cycle, outpacing the Pennsylvania Suburbs by over two percent in growth as of Q4 2018. Rental rate growth can be traced in part to a tight Trophy market despite the infusion of over 2.3 million square feet in the CBD this year. In addition, an influx of institutional ownerships has led to substantial capital improvements to the existing stock, resulting in a record CBD Class A rental rate of $33.01 p.s.f. The combination of improved supply and strong tenant demand has driven rents.
- Despite significant growth in the CBD and Pennsylvania Suburbs, rents in the Southern New Jersey Suburbs and Northern Delaware have not kept pace. Slower job growth, tenant defections, and increased vacancy due to large tenant downsizings have contributed to the gap in rental rate growth. Those markets are also more susceptible to shocks from large corporate decisions. Finally, lack of ownership turnover, particularly to institutions, has left the building stock largely unchanged.
- Barring any major economic shifts, the near-term fundamentals in each submarket cluster suggest that more of the same rental rate conditions will persist (limited large block availability in the CBD; tenant downsizing, and corporate move-outs in the outer markets).
Source: JLL Research