Philadelphia regional office forecast projects flat rents, occupancy
Despite impact of the pandemic, vacancy expected to rise no more than 150 bps, rent declines less than 5%
March 15, 2021
Philadelphia regional office forecast
- JLL’s regional office market forecasting process projects optimistic, moderate, and severe scenarios for major markets around the U.S. for vacancy rates and rents. Using this econometric model, regional office market performance in the Philadelphia region is anticipated to be relatively flat over the next four years even in light of the COVID-19 pandemic.
- Starting from a base case of 15.4% vacancy in 2020, we project total vacancy may hold steady (optimistic scenario) in 2021 or increase to 16.8% in our most severe projection. This 140 basis point increase over 2020 vacancy levels is indicative of the possibility of 1.95 million square feet of office space becoming vacant over the course of 2021 throughout the market.
- While we have yet to see major declines in regional asking rents during the course of the pandemic, our most severe projection suggests that year-over-year asking rents could decrease by as much as 5%, with subsequent years in 2022 and beyond mostly projecting modest rent growth, in true Philadelphia market fashion. A 5% decline in rents would result in 2021 regional rents of $27.20 across the market.
- The next six months of the pandemic are likely to predict the trajectory of the market for years to come, but Philadelphia’s diversified economy, limited new supply, and relative affordability bolster our projections of market performance over the next four years.