Philadelphia pulls ahead of nation’s office recovery in 2025

By Brenda Nguyen CoStar Analytics

Philadelphia emerged as the most stable office market among the 15 largest U.S. office markets heading into the spring season. Following a year of occupancy gains, the Philadelphia region now boasts the lowest office availability rate at 14.1%, slightly ahead of Minneapolis at 14.2%.

In a notable departure from national trends, Philadelphia is one of only three major U.S. office markets experiencing positive absorption—the measure of space occupied versus vacated—over the trailing 12 months, joining Dallas-Fort Worth and New York in registering occupancy gains, while the remaining top U.S. office markets continued to see occupancy losses.

The Philadelphia regional office market recorded 1.2 million square feet of net absorption during this period, representing a 0.4% increase relative to its inventory. Recent performance places the market ahead of the national recovery trajectory at a time when office downsizing remains prevalent across the country.

For context, the majority of the top 15 U.S. office markets experienced occupancy losses of between 1 and 3 million square feet. Philadelphia's performance stands in stark contrast to such markets as Boston which suffered negative absorption rates of -1.6%, and San Francisco, with -1.4%.

Several factors contribute to the relative stability of Philadelphia's office market. The region benefits from a diverse economic base anchored by education, healthcare, and government sectors—industries that have proven more resilient in the post-pandemic environment and less prone to remote work than the technology sector that dominates markets such as San Francisco.

Additionally, Philadelphia had significantly less speculative office development during the 2010s. This limited pipeline of new supply has buffered the local market from the oversupply issues affecting similar metropolitan areas such as Boston.

Despite these encouraging trends, challenges remain. Philadelphia still has 11.3 million square feet more available office space than in early 2020, and uncertainty persists about whether recent positive momentum will continue through 2025 amid national recession concerns.

Nevertheless, as other major markets continue to struggle with rising levels of office availability, Philadelphia's recent positive absorption represents an encouraging sign for the region's office.

www.omegare.com