PHILADELPHIA- Newmark Grubb Knight Frank is predicting moderate growth in the suburban Philadelphia office market this year – mostly due to companies that will expand in place in key submarkets.
“Organic growth by expansions of existing tenants is expected to drive the bulk of office space demand in Philadelphia’s suburban markets during 2013,” said Bob Clements NGKF’s managing director for the area at the company‘s annual forecast session.
“In spite of uncertainty coming out of Washington, D.C., we expect continued occupancy growth in the region, given its relatively minimal exposure to the potential sequestration cuts,” Clements said.
Vacancy rates fell in each submarket during 2012, while slow economic growth became the “new normal,” according to the company’s latest reports, outlined at the session.
Construction has been limited, reported NGKF, which bodes well for landlords who are still striving to fill space emptied out during the recent recession. Office markets are tightening up in Bala Cynwyd, Conshohocken and Radnor, and that will help stabilize the adjacent office areas, such as King of Prussia, Wayne and Plymouth Meeting.
“Class A landlords, specifically in and around Radnor and Conshohocken, will enjoy rent growth driven from consistent demand for high-end space in key geographic submarkets,” said Jeff Mack. “And submarkets abutting Radnor and Conshohocken also will benefit as these hot spots currently have very little supply to satisfy many of the requirements in the market. Expect King of Prussia to experience occupancy growth as a result.”
Reid Blynn said, “The market continues to show improvement with concessions diminishing in core markets like Radnor. Outside of core markets, tenants continue to win concessions.”
The NGKF executives said southern New Jersey may feel more impact from the mandated “sequestration” spending cuts in federal spending. “We already know of some tenancy loss due to a company tied to federal contracts,” said Anne Klein, who is based in Marlton, NJ.