Increase in direct space driving growth of office availability rate in Philadelphia
Of 2.5 million s.f. of new availabilities listed since Q2, 86 percent are direct.
August 31, 2020
- Since the onset of the pandemic, a considerable amount of focus has been on the volume of sublease space coming to the market as companies have adjusted to working from home and plan for some amount of longer-term flexible office strategy. New York City has seen over 1.7 million square feet of additional sublease vacancy hit the market, and San Francisco saw sublease vacancy nearly triple. Combined, New York and San Francisco were responsible for 27 percent of all U.S. occupancy losses in Q2.
- The story is significantly different in Philadelphia, however. Between Q2 and Q3, sublease availabilities increased by only 342,000 s.f.market-wide, compared to a 2.1 million s.f. increase in the total volume of direct available space.
- While it is clear that some of the increase in directly available space can be attributed simply to fallout from the pandemic, the regional office market is also in the midst of a large lease rollover cycle, putting space back on the market direct where tenants may have traditionally renewed, relocated, or expanded.
- Although the long-term effects of COVID-19 remain unclear, in true Philadelphia fashion, we expect occupancy rates to dip slightly but remain healthy overall, especially once the initial health crisis abates.