PHILADELPHIA-As existing Center City tenants ink leases for space in Brandywine’s Cira Centre, currently under construction, large blocks of space open up in class A properties. The increased amount of high-priced available space in two Downtown trophies, Bell Atlantic Tower and Mellon Bank Center, along with a “significant increase in leasing activity Downtown,” pushed up the average class A rental rate here, according to the first-quarter 2004 report from the local office of Studley.

The overall asking rates for office space increased 1.6% to $22.10 per sf, up from $21.74 per sf in fourth quarter 2003. “The rental rate was essentially driven by the class A market, which, though still down 50 cents compared to the same period last year, was up 80 cents to $24.02 (per sf), or nearly 3.5%, for the first quarter,” states the Studley report.

The report distinguishes between asking rates and effective rates, however. The overall availability rate for the Downtown submarket increased to 15.4% in first quarter, compared with 14.9% in the final quarter of 2003. With Cira Centre adding to the Center City inventory, the number of contiguous blocks of more than 50,000 sf jumped to 20.

This combination of factors gives both large and small tenants a lot of options. “As a result, owners continue to try to sign new tenants and hold onto their existing tenants by lowering effective rents and increasing concession packages,” states the report.

Studley’s “CBD Transaction Barometer” for this year’s first quarter indicates that tenants inking eight-year leases for under 50,000 sf get six months free rent and $40 per sf in tenant improvements. TIs for larger tenants inking 10-year leases are $50 per sf, according to the barometer.

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