Renovate & Consolidate
- The vacancy rate decreased slightly during the first two quarters of 2017 from an adjusted 12.2 to 12.0 percent.
- Year-to-date absorption was ahead of 2016’s pace, but multiple submarkets registered occupancy losses.
- Asking rents increased by 1.6 percent, below the 3.4 percent growth rate of the first two quarters of 2016.
- Investor demand remained strong and user sale activity increased. .
The regional office market had a stronger showing in the second quarter following a bumpy start to the year. Space efficiency and cost-control continue to steer leasing decisions. Nationally, a footprint reduction of 10–20 percent upon renewal is becoming the standard, and there are instances where the reduction has been significantly higher. This trend has definitely impacted the Philadelphia region as multiple large tenants renewed, downsized, or moved and consolidated.
Changing attitudes about the location and layout of office space, numerous co-working options, and emerging technologies are impacting the speed, size, and final location of deals. Landlords are facing more competition from buildings that can offer flexible space and terms, speed of occupancy, or temporary space while long term decisions are finalized.