Tuesday, August 8, 2023

Mounting Sublet Inventory Intensifies Philadelphia’s Office Woes

By Brenda Nguyen Costar

Office sublease availability has increased to 8.1 million square feet across the Philadelphia metropolitan area and now accounts for 3% of the 49.2 million square feet of available office inventory. As of the third quarter, 280 office properties in the Philadelphia region have available sublet spaces.

While sublet availability still comprises a small fraction of the total available office inventory, the fivefold increase in office sublet space since the pandemic is worrisome. In 2019, sublet space accounted for only 0.6% of the available office space in Philadelphia.

The City of Philadelphia accounts for 35% of total sublet availability at 2.8 million square feet. Of this, Center City is responsible for 74% of the city’s total sublet availability. If University City and the Navy Yard are included, they collectively comprise 88% of the city’s sublet availability.

The Philadelphia suburbs have 5.2 million square feet of sublet office space on the market, nearly double that of the total in the city of Philadelphia. While the suburbs encompass a significantly larger geography, sublet spaces are notably concentrated in just a few locales. Namely, Horsham ranks as having the most sublet space with 515,000 square feet, followed by King of Prussia with 455,000 square feet and Blue Bell with 365,000 square feet.

The largest sublet space on the market is State Farm’s former regional headquarters in Concordville. The 340,000-square-foot building, constructed in 1980, has lingered on the market for nearly two and half years after State Farm adopted a flexible work policy. This building is a standard example of dated, suburban properties that are struggling to backfill their spaces in a post-pandemic era.

Despite some companies choosing to transition into remote work in the middle of their lease, sublet availability still makes up a comparatively small fraction of the overall office vacancy in the Philadelphia market. Nevertheless, mounting overall office vacancy stemming from tenants opting to downsize when their leases expire continues to add pressure on the already-dislocated office market.


No comments:

Post a Comment

Note: Only a member of this blog may post a comment.