Regional markets on strong footing before disruption from COVID-19

May 22, 2020

Philadelphia, PA — Newmark Knight Frank (NKF) has released its first quarter 2020 office reports for the Philadelphia CBD, suburbs, Southern New Jersey and Northern Delaware. The global COVID-19 pandemic did not begin to cause significant economic disruption in the region until mid-March; therefore, first quarter statistics will not be fully reflective of the current moment in the commercial real estate sector. Yet, first quarter activity reinforced a market-wide position of strength, on which the region will stand to weather the stall in business. Philadelphia’s Central Business District (CBD) continued its strong late-cycle performance with 137,000 s/f of positive absorption tallied in the first quarter, trimming vacancy down to 12.4 percent. Maintaining a prevalent trend over the past few years, the CBD welcomed over 100,000 s/f of new-to-market companies, including Mindspace, a coworking operator which signed for 42,000 s/f at The Wanamaker. NKF managing director Matt Guerrieri said, “When the economy re-opens, firms in expensive gateway markets may look closer at Philadelphia as a talent-rich, affordable office market option for operational diversification or relocation.”A new office development, One Ucity Square, officially broke ground in January, with preleasing commitments from two life sciences firms (Century Therapeutics and Integral Molecular). Life sciences and healthcare companies are ever more essential in this moment of pandemic-induced economic crisis, and the CBD’s concentration of firms in these sectors, both in terms of employment and office occupancy, may mitigate disruptive effects to the office market. In the suburban Philadelphia office market, 395,000 s/f of negative absorption accumulated in the first quarter due to multiple significant retractions and limited new occupancies of space. This activity pushed vacancy up 70 basis points year-over-year to 14.7 percent, the highest measure recorded for the suburban market since year-end 2017. READ MORE

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