Tuesday, January 30, 2024

Sublet Share of Office Availability Doubles in Philadelphia Over Past Five Years

By Brenda Nguyen Costar

Of the 51 million square feet of office space listed as available in the Philadelphia market, 8.2 million square feet, or 16%, is sublet space—nearly double the amount seen in early 2019.

Nearly 280 office buildings in the Philadelphia metropolitan area have sublet availability, spanning from a mere 120 square feet to an entire 340,000-square-foot office building.

More than 35% of the total sublet availability at 3 million square feet is located within Philadelphia’s city limits. Of this, Center City is responsible for 75% of the city’s total sublet availability. If the office-heavy locations of University City and the Navy Yard are included, they collectively comprise 90% of the city’s sublet availability.

The situation is not much better in the other Philadelphia suburbs, which includes Southern New Jersey and Northern Delaware, where 5.2 million square feet of sublet office space is on the market—almost 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, Delaware County ranks as having the most sublet space with 550,000 square feet, followed by Horsham, Pennsylvania; with 402,000 square feet, King of Prussia, Pennsylvania; with 400,000 square feet and Blue Bell, Pennsylvania; with 400,000 square feet.

The largest single block of office sublet space on the market is State Farm’s former regional headquarters in Concordville, in Delaware County. The 340,000-square-foot building, constructed in 1980, has lingered on the market for more than three years after State Farm adopted a flexible work policy. This building is a standard example of dated, suburban properties that are struggling to backfill space in a post-pandemic era.

Within city limits, among the largest available sublet spaces is 8800 Tinicum Blvd. in Philadelphia’s Southwest neighborhood, which became available following PNC Bank’s consolidation of its Philadelphia operations. The 225,000-square-foot space has also sat on the market for over three years. Located within the Philadelphia International Airport complex, the office is isolated from walkable neighborhoods and diverse lunch and retail options. The existing lease expires at the end of 2024, at which point, a direct lease will become available and the property is anticipated to be characterized as a distress property.

Despite the recent increase in the amount of sublet space relisted on the market, Philadelphia’s total office availability rate of 15.4% in the first quarter of 2024 remains among the lowest of the 15 largest U.S. office markets, trailing only Minneapolis, which has a 14.6% availability. Meanwhile, San Francisco tops the nation with a 25.9% availability rate.


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