By Katie Burke CoStar News
A Philadelphia nonprofit's move to renew and expand its lease, in one of the city's biggest office deals this year, underscores tenants' increasing willingness to invest in more space.
The Defender Association of Philadelphia, a provider of legal services for indigent criminal defendants, recommitted to about 117,000 square feet at the Packard building in Philadelphia's Center City. The renewal at 1441 Sansom St. also included the addition of about 21,000 square feet of former storage space that will be built out so the nonprofit can expand its longstanding footprint in the 26-story central business district tower.
The decision to invest in the additional space was prompted after years of steady growth across the defense organization's workforce. The firm has increased its staff by about 3% each year for the past decade and now employs upward of 500 people. The nonprofit's new lease now extends until 2040, according to CoStar data.
“We just can’t fit any more people,,” Defender Association First Assistant Sarah Allen said in a statement.
The renewal agreement is the second-largest office lease to be signed in the greater Philadelphia area since the beginning of the year, according to the data, a notable feat considering that many tenants across the country are still offloading large chunks of space in an effort to adjust to pandemic-era trends such as flexible work arrangements and a sharpened focus on curbing expenses.
Yet some landlords and developers — especially those behind newer and higher-quality properties — are reporting upticks in touring, demand and leasing momentum, signaling that the worst of the real estate cuts among tenants is in the rear view mirror.
Growing Confidence
An increasingly optimistic economic outlook, coupled with the solidification of companies' return-to-office strategies, means tenants are becoming more confident in signing on for longer and larger deals in a recent report.
Leasing volume through the second quarter of the year hit the highest three-month total since the onset of the pandemic. Tenants collectively signed about 50.2 million square feet worth of office deals through the quarter ended June 30, a 15% spike compared to the reported volume throughout the prior three-month period.
Second-quarter leasing totals represent nearly 90% of those reported prior to the pandemic, growth largely driven by a larger share of deals exceeding 100,000 square feet.
Tenant requirements for larger blocks of space has ticked up over the past year, with the number of large leases per quarter hitting its highest level in the second quarter of the year since 2022, nearly double the activity in early 2023.
And even though the nonprofit allows its employees to adhere to a hybrid work schedule, the Defender Association's Allen stressed the importance of maintaining a physical workspace — especially one so close to the Family Court of Philadelphia and the Criminal Justice Center.
“When you’re representing people who are incarcerated, you have to have the ability to be in an office space, to be able to use your computer, to be able to get to the prison, to be able to communicate with your clients,” Allen said. “The Defender Association is uniquely positioned just by the very nature of our work and having to go to court as often as our attorneys go to court.”
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