In some ways, it does feel like office has stabilized in the Greater Philadelphia area and the hope is that this is the bottom. Still, a report from Colliers highlighted some pain seen in the fourth quarter.
For example, vacancy inched up slightly by 12 basis points from the end of 2024 to 19.46 percent in the fourth quarter. While the rate increased again, the pace is slowing down considerably.
"Occupancy losses reached their lowest point since 2018," Colliers explained.
To add to that point, Colliers noted that vacancy, particularly in suburban Philadelphia, has "reached its peak", increasing from 22.3 percent in the third quarter to end 2024 up just 10 basis points. Also, one area showed improvement. Southern New Jersey's vacancy declined by 130 basis points quarter-over-quarter to 14.6 percent.
Other fundamentals remained weak for office in Greater Philadelphia. Average asking rents declined by 0.4 percent from the previous three months to $30.45 per square foot. Moreover, net absorption remained in negative territory at -178,300 and widened from the -166,200 square feet seen in the third quarter.
On the bright side, a small improvement is expected overall in the market during 2026, according to Colliers. The brokerage predicts that Class A assets in "key submarkets" will enjoy the most vacancy compression.
"Regional office conditions are expected to post only modest gains in 2026, as the supply of traditional workspace continues to contract amid a steady pace of conversions to residential, educational, and other non-office uses," Colliers said.
"There will likely be more sales to owner-users, value-add investors, and redevelopment groups, reflecting the ongoing repositioning of vacant assets.
Deliveries in the fourth quarter remained at zero, while construction was flat at 438,000 square feet.
KPMG snagged the top office lease in the fourth quarter, signing for 122,333 square feet in the Philadelphia CBD Market East submarket, followed by Corteva, which took 45,852 square feet in Downtown Wilmington.
PMC Property Group made the largest acquisition thanks to its $30 million purchase in the Philadelphia CBD Market West submarket.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.