PHILADELPHIA -- An increasing amount of sublease space and new construction created an opening in the Philadelphia office market for tenants in the first quarter of 2001, according to Julien J. Studley's Market and Space Data Report.
Despite the national economic slowdown, more than 2 million sq. ft. (186,000 sq. m.) of new class A office space is expected to enter the market this year across the entire metropolitan area. Coupled with newly available sublease space, office tenants in the Philadelphia area now have more options than ever.
But those options aren't cheap. The average rental rate for class A office space in Philadelphia was $27.37 per sq. ft. ($2.55 per sq. m.) in the first quarter. That's higher than class A rates in Atlanta ($22.56 per sq. ft./$2.10 per sq. m.), Chicago ($27.21/$2.53), Dallas ($21.26/$1.98), South Florida ($25.56/$2.38), Houston ($21.70/$2.02) and Orange County, Calif. ($26.91/$2.50). Nationally, the only major metro markets recording a higher rental rate for class A space in the first quarter were New York ($71.13/$6.62), San Francisco ($68.30/$6.35), Washington, D.C. ($31.58/$2.94), Los Angeles ($27.78/$2.58) and New Jersey ($27.48/$2.56), according to the Studley report.
| PHILLY OFFICE MARKET STATS
|
City of Philadelphia Office Market
First Quarter 2001 Statistical Overview
|
| |
Total SF |
Class A |
Other |
Total Inventory |
40,240,788 |
27,306,269 |
12,934,519 |
Space Offered |
6,047,340 |
4,353,331 |
1,694,009 |
Avg. Rental Rate |
$25.23 |
$27.37 |
$19.83 |
1Q Space Leased |
304,953 |
179,600 |
125,353 |
YTD Space Leased |
304,953 |
179,600 |
125,353 |
Availability Rate |
15.0% |
15.9% |
13.1% |
| Change in Availabilty |
196,523 |
166,308 |
30,215 |
Source: Julien J. Studley Inc. Market and Space Data Report, First Quarter 2001. |
Within the Philadelphia office market, the Willow Grove submarket recorded the lowest rental rates, at an average of $18.41 per sq. ft. ($1.71 per sq. m.). Main Line/ Conshohocken recorded the highest rate, at $31.93 per sq. ft. ($2.97 per sq. m.), making it the most expensive submarket in the metro area for 10 straight quarters. This submarket, at the intersection of the Schuylkill Expressway and the Blue Route, continues to be a hot spot for financial services companies and technology groups.
Marketwide, rental rates and space availability are increasing, the Studley report notes. While the availability rate for class A office space in metro Philadelphia was under 8 percent in the first quarter of 2000, by the first quarter of 2001 that rate had reached 16 percent. "Tenants were able to find several significant blocks of space in class A buildings at below-market rents, without having to commit to a long-term lease," the report states.
The largest transactions in the first quarter were The Bisys Group's 171,500-sq.-ft. (15,950-sq.-m.) deal at the Montgomery Corporate Center and Quest Diagnostics' 109,281-sq.-ft. (10,163-sq.-m.) deal at 2750 Monroe Blvd. Both projects landed in the suburbs. The largest transactions in the city were Global Crossing's 70,000 sq. ft. (6,517 sq. m.) at 440 N. Broad St. and 63,000 sq. ft. (5,859 sq. m.) for PricewaterhouseCoopers at 30 S. 17th St. Other significant deals included ICT Group taking 102,000 sq. ft. (9,485 sq. m.) in the suburbs at Lindenhurst Road and Newtown Bypass and Paine Webber taking 44,000 sq. ft. (4,093 sq. m.) at 1735 Market St.
Two things to watch for in the coming months, according to Studley, are possible changes in large blocks of contiguous space (50,000 sq. ft., or 4,657 sq. m., or greater) coming onto the market and the impact of new, large-scale construction projects. "Despite givebacks from dot-coms and technology companies, the Philadelphia region has not seen any significant change in the number of large blocks of space available," the Studley report notes.
That could change, however, as large amounts of new space enter the market. "Developers have a slew of buildings planned for the Keystone State," the report states. "It remains to be seen how many of these projects will break ground given the current economic climate."
The largest projects under construction in Philadelphia are the 505,450-sq.-ft. (47,007-sq.-m.) 4 Penn Center at 1600 JFK Blvd. and a 350,000-sq.-ft. (32,557-sq.-m.) building at 801 Market St. For more information on the Philadelphia office market, go to
www.studley.com.
