Philly's CBD and Suburban Office Vacancy Inches Up in 2Q

PHILADELPHIA-The overall vacancy rate in Philadelphia CBD, including sublet space, stood at 12.5% in second quarter, an increase from 11.6% in the previous quarter, according to data from Wayne, PA-based Smith Mack Oncor International. Nearly two-thirds of the space vacant in second-quarter, 64%, or 2.2 million sf, is in the Market Street West submarket, the largest submarket in the CBD.

Direct vacancy in the CBD was 9% in second quarter, up from 8.5% in first quarter. Despite rising vacancy, the average asking rental rate for direct space in second quarter was $21.82 per sf, plus electric, according to Smith Mack. That’s up marginally from an average of $21.74 per sf in the CBD in the opening quarter of this year.

The overall office vacancy rate, including sublet space, in the PA suburbs outside Philadelphia rose to 22.3% in second quarter, up from 21% in the first quarter of the year. Direct space rose from 16.6% to 17.7% in the same timeframe. The average asking rental rate for direct space in the suburbs rose to $23.14 per sf in second quarter, compared with $22.73 per sf in the previous quarter.

Second-quarter net absorption in the suburban office market was a negative 275,890 sf. For the year, however, Smith Mack data shows 177,015 sf of positive absorption. In addition, in respect to the entire Greater Philadelphia office market, Smith Mack researchers see “reason to be cautiously optimistic” about this year’s second half. Among the reasons is a forecast of lower unemployment by both the Philadelphia Federal Reserve Bank and the Chamber of Commerce.