Amongst the largest CBDs, Philadelphia has the 2nd lowest construction rate relative to total inventory
Walking around the Philadelphia CBD today, you’ll struggle finding many office properties under construction, even with the direct vacancy of 9.9%, which is below the U.S. average.
January 15, 2020
- Walking around the Philadelphia CBD today, you’ll struggle finding many office properties under construction, even with the direct vacancy of 9.9%, which is below the U.S. average. In fact, only two office properties are under construction, 300 Rouse and 400 Rouse, both single-tenant buildings at The Navy Yard, totaling 231,000 s.f., just 0.5% of Philadelphia’s CBD office inventory. This isn’t the case across the top 20 U.S. CBDs, where over 52 million s.f. of office product are under construction. Looking at things another way, if office construction in Philadelphia happened at the average rate experienced across other CBDs, Philadelphia would have roughly 2 million s.f. of office product currently being developed.
- Philadelphia’s lack of office construction isn’t due to a lack of developer interest. There are over 7 million s.f. of proposed office projects within two blocks of Market Street along the 2.5 mile stretch from 13th Street to 42nd Street that are at various stages in the planning process. One uCity Square (390,000 s.f.) is looking like it’ll be the next office property to kick off, with construction expected to commence this quarter. As for the others, 1301 Market, Schuylkill Yards, 2100 Market, 2000 Arch, and the rest of uCity Square all continue to seek significant pre-leasing before those projects are able to kick off.
- One market fundamental that continues to plague Philadelphia developers is average asking rents. Of the top 20 CBDs, Philadelphia currently has the 5th lowest rent. However, this hasn’t restricted construction in CBDs such as Minneapolis and Pittsburgh, which have significantly higher vacancies and lower asking rents than Philadelphia, but together boast 2.7 million s.f. of office developments under construction.
Source: JLL Research