Q2 2023 Philadelphia Office Market Report
The Philadelphia CBD posted lower vacancy rates at 13.9 percent, slightly higher than the national average of 13.1, faring better than the major cities like Washington DC (15.9), San Francisco (18.7), Houston (18.6) and Los Angeles, CA (15.0). Rents are stable due to minimal spec construction and reliance on a diverse tenant base. As more leases expire and tenants vacate, debt financial health and loan defaults for office assets are on the horizon.
Leasing activity continues to be slow in the CBD. Concerns around economic headwinds and hybrid work have pushed tenants to re-evaluate their real estate needs, with a 20 percent overall footprint reduction. Tenants continue to reduce their footprint and/or relocate to premier Class A space, adding vacancy and sublease space to the market.
Philadelphia ranks as the 6th best Life Science market in the U.S. due to a strong concentration of researchers, access to top universities, and high wages. The Navy Yard and University City submarkets attract top life sciences tenants like Century Therapeutics, Spark Therapeutics, and WuXi STA.
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