Philadelphia Office Market
During the fourth quarter, we experienced positive net absorption of 128,709 SF for the first time since the third quarter of 2022. Large leases signed in the suburbs and a lack of lease expirations in the fourth quarter can be credited to the positive absorption. As we head into 2025, the combination of rate cuts, the sentiment of 5-day work weeks, and fourth-quarter positive absorption offer some green shoots for office demand to resurge in 2025. The office pipeline had two new deliveries in the fourth quarter: 155 King of Prussia Road in Radnor and 203 Squire Drive in Newtown Square. As it was a build-to-suit development, Arkema moved into 155 King of Prussia Road upon delivery, while 203 Squire Drive is still completely vacant and available for leasing. 2300 Market Street, 3151 Market Street, the new Chubb Insurance headquarters, and 3201 Cuthbert Street are the only office buildings left in the construction pipeline. 2300 Market Street and 3151 Market Street are expected to deliver next quarter, the Chubb Insurance Headquarters is scheduled to deliver in early 2026, and 3201 Cuthbert Street is expected to deliver in late 2026. Approximately 1.5M square feet of leases were signed during the fourth quarter of 2024. Greater Philadelphia’s office market performed well in the first half of the year, outpacing leasing expectations. However, a lack of signed leases in the third and fourth quarters has put us behind last year’s numbers by about 990K SF.
Download Philadelphia Office Market Report 4Q24Philadelphia Industrial Market
Industrial construction deliveries have declined significantly, with approximately 6.4M square feet delivered through 2024. The fourth quarter saw the delivery of 883,995 square feet of new supply, significantly below the quarterly average of 3.3 million square feet over the past eight quarters. This reduction aligns well with the current slowdown in demand for new bulk facilities. Year-to-date, the market has absorbed a total of 6.1 million square feet. Between the third and fourth quarters, available sublease space expanded to 3.2 million square feet. Southern New Jersey alone accounts for 1.4 million square feet of this total, representing 44.3% of the market’s sublease availability, even though it comprises just 39.6% of the region’s overall available inventory. By the end of 2024, the annual average asking rent had declined by 2.1%, a shift following five years of unprecedented rent growth. During this period of rapid rent increases, over 59 million square feet of industrial space was delivered, representing approximately 11% of the market’s total inventory. This substantial influx of supply within a short timeframe contributed to the moderation of rents in 2024, as the supply effectively met the robust demand seen in recent years.