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PHILADELPHIA-Rent rates in Center City’s class A office buildings inched up during the year’s first quarter as the vacancy rate fell to nearly 10%, about eight points below the dire predictions forecast two years ago. Comcast Corp., which was blamed for the once-looming gloomy scenario, is now seen as a principal savior.

“Nearly a million sf of space has come off the market,” John Derham, senior managing director of Cushman & Wakefield of Pennsylvania, tells GlobeSt.com. “Comcast Center will open more than 90% leased, and Two Liberty took 328,000 sf off the market by converting its top floors to residential condos. To us, it’s absorption.”

When Malvern-based Liberty Property Trust broke ground for the nearly 1.3-million-sf Comcast Center, the locally based cable TV giant had committed to less than half of the space. It has now committed to 87% of the building and also drawn new tenants, which take overall preleasing to above 91%. It will open by year’s end.

“We also got some growth,” Derham adds, pointing to the expansion of some law firms and a few new businesses, which Derham suggests will compensate for Lincoln Financial’s announced decision to relocate significant staff from Centre Square to the suburbs. “A year ago, large tenants had a lot of options. Now, there are virtually no large spaces left,” he says.

The earlier vacancies led to a flight to quality, he confirms. The C&W first-quarter report says the average asking class A rent rate in the CBD is $25.23 per sf, which Derham says is up from $24.87 per sf in 2006.

Asked if the positive trend will continue, he says, “Our visitor attraction is through the roof, and that has sparked business development. Center City is still one of the best bargains in the Northeast. We’re cheaper than Boston, Washington and New York, and offer a great, vibrant city. Historically, we’ve never seen much relocation from New York City, but Select Greater Philadelphia [a local nonprofit] is working to correct that.”

Two additional first-quarter reports support Derham’s view. The local office of Jones Lang LaSalle also points to Comcast’s expansion, which does not stand alone. The report notes that a new law firm lease joined renewals to take Seven Penn Center’s occupancy to 90%, and BDP expanded to 80,000 sf at Penn Mutual Tower, as GlobeSt.com previously reported.

In assessing the entire region’s office market, Colliers Lanard & Axilbund says the Center City and suburban submarkets are “in a much healthier position than two years ago.” Submarket office vacancies of between 15% and 20% were common in early 2005, the report says. In early 2007, “most submarkets have dropped to the 12% to 13% range. We anticipate further decreases in vacancy over the next six months with encouraging job growth projections,” it concludes.

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