Greater Philadelphia Office, Q Suburbs Continue to Perform, Solid Fundamentals in CBD

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1 Greater Philadelphia Office, 217 Suburbs Continue to Perform, Solid Fundamentals in CBD 243,662 sq. ft % $ Million sq. ft. Figure 1: Philadelphia CBD Office Rent vs. Direct Vacancy *Arrows indicate change from previous quarter Per Sq. ft. Per Year ($,FSG) 3 29 Forecast (%) Q Q Q Source: CBRE Research, 217 Asking Rent (L) Direct Vacancy Rate (R) Downtown: University City saw a large block of space open up as CHOP vacated 226,89 sq. ft. at 3535 Market Street and will be relocating to their recently completed facility in Gray s Ferry. This has pushed vacancy in the submarket to 8.3%. Suburbs: Occupancy within the Philadelphia suburbs continued to grow during 217 with 18,22 sq. ft. of occupancy gains pushing yearto-date net absorption to 552,734 sq. ft. Northern Delaware: Downtown Wilmington performed very well in 217. The submarket recorded 196,289 sq. ft. of occupancy gains, the highest figure seen in more than ten years. The largest transaction this quarter was Capital One s 9, sq. ft. lease at 8 Delaware Ave. Southern New Jersey: Southern New Jersey had solid occupancy gains in 217, netting 122,237 sq. ft. of absorption. Much of this growth comes from Bayada, who will occupy approximately 131,161 sq. ft. of space in their recently purchased buildings in Pennsauken. 217 CBRE Research 217 CBRE, Inc. 1

2 GREATER PHILADELPHIA OFFICE Figure 2: Philadelphia Metro Office Market Statistics SUBMARKET Number of Buildings Inventory Vacancy Availability Under Construction 217 YTD Net Absorption Avg. Asking Avg. Class A Asking Market West 51 26,291,64 11.% 13.2% 1,854, 74,5 $29.27 $3.56 Market East 19 6,789, % 15.5% -29,283 $26.91 $27.55 Independence Hall 16 5,82, % 21.4% 25,567 $26.46 $28.68 University City 23 4,565,28 8.3% 11.8% 34, -189,873 $41.27 $41.75 Downtown Philadelphia Subtotal 19 43,466, % 14.5% 2,194, -119,539 $29.31 $31.12 Bala Cynwyd 29 2,873, % 17.5% -7,37 $3.92 $32.21 Blue Bell 79 3,975, 21.2% 25.2% 71,823 $22.55 $28.69 Central Bucks County 59 2,, % 27.8% 268,91 $2.2 $27.28 Conshohocken 26 3,394,1 1.2% 14.8% 15,58 $34.84 $37.86 Delaware County 83 5,129, % 18.6% 71, -83,982 $25.6 $26.19 Exton/West Chester 91 4,12, % 15.7% 75,6 $24.39 $24.39 Fort Washington 46 3,389, % 27.8% -123,697 $24.23 $27.42 Horsham/Willow Grove 84 5,138, % 26.5% 76,499 $23.49 $27.22 Jenkintown 21 1,352, % 19.7% 7,451 $23.67 $25.6 King of Prussia/ Valley Forge ,785, % 19.6% 11,55 11,344 $26.42 $3.7 Lower Bucks County 111 5,256,34 2.3% 24.% 78,968 $23.86 $26.27 Main Line 46 2,77, % 13.1% 16,153 $36.9 $37.73 North Penn 15 1,29, % 53.% -3,47 $2.44 $23.56 Plymouth Meeting 37 2,352, % 22.9% -535 $29.37 $31.27 Upper Main Line 42 1,263, % 22.9% 52,523 $25.77 $28.68 Suburban Philadelphia Subtotal 99 6,832, % 21.4% ,239 $25.42 $3.8 Source: CBRE Research, CBRE Research 217 CBRE, Inc. 2

3 Central Bucks County King of Prussia/ Valley Forge Lower Bucks County Horsham/ Willow Grove Exton/West Chester Blue Bell Upper Main Line MainLine Conshohocken Jenkintown Plymouth Meeting North Penn Bala Cynwyd Delaware County Fort Washington.Thousands sq. ft. GREATER PHILADELPHIA OFFICE Figure 2 (cont.) SUBMARKET Number of Buildings Inventory Vacancy Availability Under Construction 217 YTD Net Absorption Avg. Asking Avg. Class A Asking Burlington County 192 9,542, % 17.1% 25,214 $2.26 $23.28 Camden County 12 6,97, % 2.5% 472, ,154 $2.92 $24.96 Gloucester County , % 22.2% -5,65 $19.44 $19.33 Southern New Jersey Subtotal ,98,37 16.% 18.6% 472, ,718 $2.55 $23.89 Wilmington CBD 38 6,85, % 2.4% 196,289 $25.26 $27.44 New Castle Co. Suburbs Northern Delaware Subtotal Lehigh Valley East Lehigh Valley West Lehigh Valley s 168 8,867,34 15.% 17.5% -26,483 $22.82 $ ,717, % 18.7% 169,86 $24.23 $ ,13, % 22.5% 67,29 $2.84 $ ,722, % 15.7% 37,34 $19.43 $ ,735, % 17.8% 14,63 $19.88 $21.11 TOTAL 1,8 146,732, % 18.52% 2,857, ,167 $25.51 $28.97 Source: CBRE Research, 217. Figure 3: Suburban Philadelphia Office Year-to-Date Absorption Source: CBRE Research, CBRE Research 217 CBRE, Inc. 3

4 Sq. ft. (s) Sq. ft. (s) GREATER PHILADELPHIA OFFICE OFFICE ABSORPTION Figure 4: Net Absorption 1,6 1, Q Q Source: CBRE Research, 217. Figure 5: Vacancy Rate (%) 18 OFFICE VACANCY Q Q Source: CBRE Research, 217. Figure 6: Development Pipeline 4, OFFICE DEVELOPMENT PIPELINE 3, 2, 1, Source: CBRE Research, CBRE Research 217 CBRE, Inc. 4

5 ($, Millions) Per Sq. ft. Per Year ($,FSG) GREATER PHILADELPHIA OFFICE OFFICE LEASE RATES Figure 7: Office s Q Q OFFICE CAPITAL MARKETS Source: CBRE Research, 217. Figure 8: Office Sales Transactions 3,5 3, 2,5 2, 1,5 1, 5 PHILADELPHIA TROPHY OFFICE VACANCY Source: Real Capital Analytics (4-qtr. Aggregate) Figure 9: Philadelphia Office Trophy Vacancy Rates (%) Philadelphia CBD Philadelphia Suburbs Source: CBRE Research, 217. Wilmington CBD 217 CBRE Research 217 CBRE, Inc. 5

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