Wednesday, July 10, 2019

Corporate Downsizings Are Causing Available Office Space to Accumulate in Philly’s Northern Suburbs

The share of Horsham/Willow Grove’s office stock listed as available for lease rose to 15% last quarter, the highest level recorded there since CoStar began tracking the figure in 2005.

Toll Brothers was the largest single contributor to the recent rise in availabilities. In early 2019 the home builder announced it would vacate its 203,000-square-foot headquarters at 250 Gibraltar Road in Horsham by the end of the year and move to a smaller, 167,000-square-foot office at 1100 Virginia Dr., in the nearby Fort Washington/Spring House submarket.

Toll Brothers’ announcement followed 120,000 square feet coming available at 425 Privet Road in Horsham during late 2018. This property long housed a U.S. office of Israel-based Teva Pharmaceuticals, which enacted a major restructuring that included 14,000 layoffs globally last year.

Horsham/Willow Grove has long been the tightest office submarket in the northern suburbs, and it still is. But the accumulation of record space availabilities at a time when Philadelphia’s economy remains healthy and unemployment is at multi-decade lows sends a clear signal that tenant preferences are shifting away from the submarket. Long-term challenges could lie ahead for local landlords as tenants loyal to the northern suburbs gain increased bargaining power in lease negotiations.

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