PHILADELPHIA—Commercial real estate brokerage firm WCRE reports that the Philadelphia and Southern New Jersey office markets held steady in 2019, with strong leasing volume and low vacancy rates.
In the firm’s fourth quarter 2019 report on the Southern New Jersey and Southeastern Pennsylvania markets, WCRE states that although leasing activity was down overall, vacancy rates remained low and gross leasing absorption was positive, although trending lower when compared quarter-over-quarter.
The vacancy rate in Philadelphia’s office market rose slightly to 8.7%. The office vacancy rate is still near a 20-year low, and below that of comparable major cities, WCRE notes.
The industrial sector in Philadelphia remains very strong. The fourth quarter vacancy rate stood at 5.4% at the end of the fourth quarter, while net absorption was at 5.4 million square feet. Rent growth of 4.8% has far exceeded the long-term average of 1.7%.
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In terms of the markets the firm covers in Southern New Jersey (Burlington, Camden and Gloucester) WCRE reports that there were approximately 204,077 square feet of new office leases and renewals executed in the fourth quarter, which was down compared to the previous quarter. However, the sales market stayed active, with about 1.5 million square feet on the market or under agreement. Completed sales more than doubled from the previous quarter, at approximately 781,130 square feet trading hands.
New leasing activity accounted for approximately 65% of all deals for the three counties surveyed. Overall, gross leasing absorption for the fourth quarter was in the range 85,000 square feet, up about 20% over third quarter absorption levels.
“CRE performance was good by almost every measure as the year wound down,” said Jason Wolf, founder and managing principal of WCRE. “It seems like when one sector or part of the region underperforms, the rest of the market keeps moving in the right direction.”
Overall office vacancy in the market was approximately 12% at the end of the fourth quarter, which was up half a point from the previous quarter. This is still near a 20-year low.
The report notes that average rents for Class A and B product continued to show strong support in the range of $10.00-$15.00-per-square-foot triple net or $20.00-$25.00-per-square-foot gross for deals completed during the quarter. Those averages have hovered near this range for more than a year.
Office vacancy in Camden County rose to 12% for the quarter, due in part to the return of a few large blocks of space to the market.
Burlington County’s office vacancy also stood at 12%. Burlington’s vacancy rate also jumped earlier in the year due to several large blocks of space returning to the market, WCRE notes.