CONSHOHOCKEN, PA-Newmark Grubb Knight Frank directors are predicting an uptick in demand for office real estate next year in suburban Philadelphia, southern New Jersey and the Wilmington, DE, submarket.

“We predict growth-stage companies to be most active in the market as more and more venture capital moves upstream to revenue-generating enterprises, funding overall organic growth in the marketplace,” said Reid Blynn, an executive managing director for NGKF.

He and Jeff Mack, who holds the same position with the company, delivered the annual Philadelphia Metro Suburban Forecast at an annual event held here.

Mack and Blynn acknowledged recovery in suburban leasing markets has been slow since peak vacancy in 2010, but said increased activity in 2013 points toward a broader recovery.

Mack predicted that Class B office space will continue to account for the most activity in the coming year. On the other hand, he said, “We expect some speculative office development, supported by an element of pre-leasing, to kick off in the Bala Cynwyd, Radnor/Conshohocken, Wayne or Plymouth Meeting submarkets, where inventories of Class A space are in short supply.”

NGKF executives generally described a return to normalcy for investment sales, which totaled $797 million in 2013.

“As REITs orient capital toward CBD core-office or logistics-grade industrial assets, the appetite among private investors and funds for stabilized or value-add properties in the suburbs accounts for the demand side of suburban office sales,” said Mike Margolis f NGKF Capital Markets. He noted that sales activity is still well below historical levels.

Anne Klein, who is based in southern New Jersey, said “REITs have been net sellers over the past few years, a trend we expect to persist and create more competition for tenants in the market.” But she added, “In spite of this, overall pricing should continue to improve.”

In Wilmington, nothing of the kind is expected in 2014, however. NGKF's Wills Elliman noted that AstraZeneca will continue to vacate a total of 545,000 square feet. He said the Wilmington market has not yet fully recovered from Bank of America's vacating of 600,000 square feet in 2007 and 2008.

Elliman did point to one nice deal in Wilmington, brokered by him and his partner Neal Dangello: CSC recently committed to a 175,000-square-foot build-to-suit project at The Commons at Little Falls being developed by Trefoil Properties.

Instant Insights /

Forecast: Philly Metro Office Market Uptick

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