Philadelphia: Post-renovation office rents in the Pennsylvania Suburbs have increased 83% since 2010
While the Pennsylvania Suburbs have not seen much ground-up construction this market cycle until recent ground-breakings, tenant demand for high-quality office space has driven significant renovations in key submarkets in the hopes of creating modern office space to attract top quality talent.
- Since 2010, average asking rents prior to and following renovations have increased by 83 percent, from $18.70 per square foot to $34.26 per square foot (FSG). While overall market conditions certainly supported some of this growth, overall average asking rents only increased 14.6 percent over this same timeframe, supporting the theory that landlords willing to take the risk on construction can beat the overall market.
- 2019 goes on record as the largest increase for rents following significant renovations, where the delta stood at +$3.53 per square foot, an 11.5 percent increase over pre-renovation average asking rents. 2017 came close with an increase of +$2.66 per square foot, or a 10.5 percent increase pre- to post-renovation. While 2018 represents a bit of an anomaly in the overall trend, we believe landlords of older office product will continue to achieve significant premiums following smart renovation investments. This is due to ongoing economic growth, tight supply of highly skilled workers, limited speculative space in suburban office construction that is already underway, and growing congestion traveling into and around the downtown.
Source: JLL Research