Previous downturns had only marginal impacts on Philadelphia office occupancy and rents

Two decades of data indicate that the region’s economy has been somewhat insulated from macroeconomic turmoil

May 18, 2020
  • As the region, nation, and world chart the uncharted waters of COVID-19 and its economic fallout, it can be instructive to look back at Philadelphia’s historical performance through previous downturns. Rent and vacancy data from the CBD and Pennsylvania suburbs combined going back two decades reveal that the region’s office market has managed to avoid the dramatic highs and lows felt more acutely in other places.

  • Through both the dot-com & 9/11 downturn and the financial crisis of 2008, rents were only marginally affected. They dipped 3.7 percent at the end of 2001, but held steady from then on, and actually climbed through the Great Recession. The upward trajectory of rents throughout the last four years is largely a function of reinvestment, renovation, and new construction creating higher-quality product that drives pricing up. And because the investment market has been so cautious particularly with the delivery of new inventory, the supply is never overbuilt enough to create sudden spikes of vacancy.

  • Occupancy is more clearly affected by macroeconomic conditions. Vacancy more than doubled between 2000 and 2004, but grew by only 3 percent between 2007 and 2010. Which downturn is more instructive for today? That remains to be seen. The entire office-occupying world is in the early stages of assessing what space planning looks like beyond 2020.