PHILADELPHIA-The office market here, with a 14% vacacy rate, is one of the strongest in the country, according to a Marcus & Millichap report. In the Center City and University City submarkets, vacancy rates are actually below 10%.

Fundamentals aren't expected to improve much more with a lack of new jobs coming into the area. Researches say that vacancy rates will increase by 40 basis points by the end of the year. Additionally, landlords' are seeing net operating income decrease due to the rent concessions they are handing out. Rents are seen dropping by 2% this year.

These strong fundamentals make up for the fact that transactions are pretty stagnant in the area. Trasaction velocity declined 30% in the last year alone, according to the report. It's still a situation where buyers are looking for lower prices and owners aren't yet ready to sell.

Of course, construction is also down, with 243,000 square feet of new office space coming online this year. That is far below the five-year average of 1.3 million square feet.

But if things turn around, that could change. There is more than 19.7 million square feet of development planned in the area, representing 18% of what exists in the market today.