This year prime tenant Cigna Corp. decided to maintain itsheadquarters in the building, but downsize from about 633,000 sf tojust over 440,000 sf. At the same time, Ace Ltd., which acquiredCigna during Cigna's tenure in the building and occupiedapproximately half of the property under a master lease, isrelocating to a building it acquired at 463 Walnut St.

This occurs during a period off ascending vacancies in the CBDoffice market. A third-quarter report from the local office ofCushman & Wakefield puts the overall vacancy rate at 17.6%,"the highest level since 1995," before factoring in the looming TwoLiberty Place vacancy. Approximately 25% of Brandywine's CiraCentre tower, now under construction, has also yet to be leased.It, too, will be in the competitive fray, which could beexacerbated even further by any decision to move forward withconstruction of One Pennsylvania Plaza, the tower Malvern, PA-basedLiberty Property Trust hopes to develop for Comcast, which wouldtake just half of the initially projected more than one millionsf.

Andrew Rudzinski, director of research and marketing in CBRE'soffice here, says the Philadelphia CBD anticipates "the possibilityof a tremendous spike in vacancy in the upcoming 24 months pendinga decision to build One Pennsylvania Plaza." In his third-quarter2004 report, he also refers to "large blocks of contiguousspace…coming online during the 2005 cycle" as a result of tenantdownsizing. Nevertheless, reports from CBRE, C&W and othersindicate that asking rental rates for class A properties in theWest of Broad Street submarket remain stabile at between $24 per sfand $27 per sf, although all acknowledge that effective rates arewell below that level. Cigna's downsized renewal, for example, waswidely reported to be for a rate that was lower than its previousrate.