Trophy and Class A direct absorption slows, Class B rebounds, and vacancy rates tick slightly higher in the Greater Philadelphia Region
After a slow Q1 2019 where the region experienced -606K s.f. of absorption, both Q2 2019 and Q3 2019 have seen strong rebounds.
October 30, 2019
- After 6 straight years of nearly 800K s.f. of positive direct absorption for Trophy and Class A buildings in the Philadelphia regional office market, 2019 is shaping up to be a slower year, with only 93,210 s.f. of direct absorption in Trophy and Class A buildings in 2019 YTD. Tenants trading up from Class B properties led to strong gains in Trophy and Class A properties in 2017 and 2018. Now, in 2019, Class B building are rebounding after 2 straight years of negative absorption thanks in part to expanding or growing firms moving in.
- After a slow Q1 2019 where the region experienced -606K s.f. of absorption, both Q2 2019 and Q3 2019 have seen strong rebounds. Absorption was 257K s.f. in Q2 2019 and 784K s.f. Q3 2019, respectively.
- Since 2017 vacancy rates have climbed from 12.4% to 13.7%. During that same time period, an additional 5,794,232 s.f. of office space has been delivered to the Philadelphia region, most fully occupied, thanks to notable developments such as the Comcast Technology Center, uCity Square’s 3675 Market, and the new Aramark building at 2400 Market.
- 2020 will be a down year for new deliveries, but 2021 and beyond looks strong with new construction set to kick off at Seven Tower Bridge, One uCity Square, and Parkway Corp’s developments in Market Street West. The takeaway: although growth is beginning to slow, absorption numbers in 2019 continue to be positive with a strong pipeline of tenants in the market heading into 2020 and beyond.
Source: JLL Research