PHILADELPHIA, PA—Class A asking rates throughout the region hit an all-time high of $30 per square foot, propped up heavily by the Central Business District and the Philadelphia suburbs, according to CBRE’s first quarter 2019 office market report.
“Landlords typically prefer to see demand before increasing rents and last year was a record year for demand,” says George Cauffman, executive vice president, CBRE. “As a result, landlords responded accordingly and asking rents spiked at the start of 2019. Enhancing this trend is the high level of investment activity in the office sector, with landlords expecting increased returns.”
During the first quarter, however, the net absorption rate decreased by 19,467 square feet from the previous quarter as a result of corporate downsizing, although this was largely canceled out by positive demand growth in the surrounding suburbs, most notably in Northern Delaware.
“The decrease in occupancy did not come as a surprise, as large tenants continue to reduce their footprints or consolidate their employees within a single location,” says Cauffman.
On the capital markets front, the record sale of 1735 Market Street in Center City, Philadelphia helped keep office sales volume for the first quarter in the metro area in-line with recent quarterly figures. Other notable deals during the first quarter included the sale of Spring Mill Corporate Center in Conshohocken for $131 per square foot and Valley Forge Park Place for $106 per square foot.
Correction, 4/26/2019, 8:52 a.m.: Because of an editing error, an earlier version of this story described the CBRE report as covering the first quarter of 2018. It actually covers the first quarter of 2019.