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 4.6M square feet delivered through 2024. The 1.2M square feet of new supply delivered during the third quarter is less than half of the quarterly average of 3.5 MSF over the past eight quarters. This is well-timed as demand for new bulk facilities has also slowed. The market has absorbed 6 MSF year-to-date. Available sublease space declined in the third quarter to 2.7 million square feet. With 1.4 million square feet of sublet availability, Southern New Jersey constitutes 52% of the market’s sublease availabilities despite comprising only 3.5% of the region’s inventory. The lease-up of Class A space in Burlington County, coupled with moderating demand, has put downward pressure on asking rates in the Greater Philadelphia market. Rents have declined by 3.9% over the past 12 months after growing steadily since 2017. The decline in rental rates was primarily due to class C properties, which saw a 9.7% decrease in rents over the past 12 months.