Saturday, January 19, 2013

Where Philadelphia’s office market is headed in 2013

by Natalie Kostelni
The Center City Philadelphia office market ended the year with a 14.1 percent vacancy rate, which equates to about 6.2 million square feet of empty office space.
That vacancy rate is more or less flat when compared with last year but that number is expected to decline this year and eventually put pressure on rents.
“Rental rates are trending upward, slowly but surely.” 
Among some of the other highlights:
• Brandywine Realty Trust  paid $34 million, or $76 a square foot, for 1900 Market St., a 456,922-square-foot structure better known as the Stock Exchange building. No word yet on what the company will do with the building.
• Tenant improvement dollars are expected to diminish as space continues to tighten up and rents rise.
• Net absorption for this year will come in around 150,000 square feet and push the vacancy rate down to 13.75 percent.
• New office construction is a maybe and the market will see more firms moving in from outside of the city.
• While the last couple of years saw tenants relocating to trophy space from Class A space, the new trend this year will see that flight to quality continue but to Class A from Class B.
• Companies will continue to shrink the amount of space they use even though they will maintain or grow their employee base.

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