There Are No Offices Being Built in Philadelphia

The drip of office developments springing up in Philadelphia has stilled, at least for now.

Following the completion of a 438,000-square-foot building at 2000 Arch Street in the second quarter, there are no office projects in the city’s active pipeline, Bisnow reported. Chubb’s built-to-suit development was the only one still being developed, according to JLL.

The lack of projects going up in the City of Brotherly Love stems in part from a dearth of tenants willing to anchor a space years before it’s actually available.

“That’s been a really big hurdle when it comes to attracting out-of-market tenants,” JLL Philadelphia research manager Emily Friedman told the publication.

The fundamentals of Philadelphia’s office market are mixed, skewed in part by the insurance company’s big move.

In the second quarter, the vacancy rate in Philadelphia’s central business district dropped to 19.8 percent, while absorption came in at 492,000 square feet. Most of that absorption, however, came courtesy of Chubb.

Inventory is dropping in Philadelphia, both for offices and subleases. Sublease space was down by 1 million square feet year-over-year in the second quarter, according to Savills, while overall office inventory fell by more than 2 million square feet. Conversions are part of the waning inventory equation, though none were announced in Center City last month, according to Friedman.

Office activity in the city’s suburbs is becoming quiet, too. In the second quarter, there were 37 deals, according to JLL, totaling 436,000 square feet of leases. That represented a 43 percent drop in leasing year over year and the slowest quarter in the submarket in five years.

Last month, investment management firm Vanguard confirmed it was vacating 88,000 square feet of office space at FLD Group’s 45 Liberty Boulevard in the suburb of Malvern. FLD Group is actively working to backfill the space, reportedly negotiating with a potential tenant for 65,000 square feet while also discussing an early lease renewal with Microsoft.

— Holden Walter-Warner