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Cushman & Wakefield: Philadelphia Office Market Sees Robust Leasing Activity, Improved Vacancy Rates

| October 14, 2016 | 0 Comments

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PHILADELPHIA, October 14, 2016 – Robust leasing activity and declines in overall vacancy rates in the Philadelphia CBD and suburban office markets are signs of continued growth, according to Cushman & Wakefield. The commercial real estate services firm’s Philadelphia research team released its third-quarter 2016 Office Marketbeat reports for the region.

Philadelphia CBD Market

The overall vacancy rate declined by 10 basis points to 10.4 percent in the third quarter. However, overall vacancy increased by 70 basis points year-over-year, largely due to the second quarter delivery of the FMC Tower at Cira Centre South. The building’s completion added over 200,000 square feet of vacant space to the market, and FMC Corp.’s move to its new headquarters left an additional 200,000 square feet of vacant space at the BNY Mellon Center.

“Direct asking rental rates increased for the eighth consecutive quarter to $29.87 per square foot, the highest in the market’s history,” said Jared Jacobs, Cushman & Wakefield Research Manager. “Overall absorption year-to-date totaled positive 463,973 square feet compared to negative 89,461 square feet at this time last year.”

Leasing activity totaled 927,869 square feet, the Philadelphia CBD’s highest quarterly total since the first quarter of 2014. The largest transaction was the 297,800-square-foot lease signed by Aramark at 2400 Market Street, where it will relocate its headquarters in 2018. Five Below also will be moving its headquarters within the submarket in 2018, inking a 180,000-square-foot lease at 701 Market Street. Other notable leases included GSA, which took 94,904 square feet at 801 Market Street, and WeWork, which will occupy 56,050 square feet at 1900 Market Street.

Despite the healthy amount of new activity, the overall vacancy rate is expected to rise over the next 12 to 18 months. The biggest increase will come during the first quarter of 2018, when Comcast will consolidate space from multiple locations within the Philadelphia CBD to its new 1.3 million-square-foot headquarters.

Philadelphia Suburban Market

“The third quarter saw the lowest overall vacancy in the Philadelphia suburbs since 2001,” said Jacobs. “The overall vacancy rate for the quarter declined to 12.5 percent, which is 250 basis points lower than last year at this time.”

Asking rental rates are up 1.5 percent since the third quarter of 2013, but remain flat year-over-year at an average of $24.21 per square foot. Year-to-date absorption rose to 1.6 million square feet compared to 370,000 square feet in the third quarter of 2015.

The increase was fueled by a number of notable tenant occupancies:

Power Home Remodeling Group moved into 104,661 square feet at 2501 Seaport Drive in Chester.

In Chadds Ford, Incyte Corp. expanded into a third building at 300 Endo Boulevard for 48,600 square feet.

Impax Laboratories, Inc. took occupancy of 47,826 square feet at 602 Office Center Drive in Fort Washington.

Significant lease signings in the third quarter included:

Voya Insurance and Annuity Company renewed for 100,000 square feet at 1475 Dunwoody Drive in Exton.

Ashfield Healthcare signed for 82,000 square feet at 1100 Virginia Drive in Fort Washington.

inVentiv Health, Inc. renewed for 51,320 square feet at 100 Brandywine Boulevard in Newtown.

Ethos Health Communications, Inc. leased 28,016 square feet at 777 Township Line Road in Yardley.

Investment sales activity continues to increase and is expected to remain robust for the remainder of 2016 and into 2017. Since the beginning of 2015, 8.1 million square feet has been sold, nearly 25.0 percent higher than the suburban total from 2010 to 2014.

 

About Cushman & Wakefield

Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 43,000 employees in more than 60 countries help investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit or follow @CushWake on Twitter.

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