Almost every portion of the greater Philadelphia office market contributed positively to the 1.38 million sq. ft. of annual absorption tallied during 2017. The Philadelphia CBD was the sole exception, as consolidations and space utilization trends eroded demand by 363,118 sq. ft. Conversely the region’s standout market, Suburban Philadelphia, posted another year of more than 1 million sq. ft. of positive absorption. About half of those gains were captured in Class A product where current vacancy sits at 11.9%, compared to its peak of 21.1% tallied in early 2010. But, while vacancy dropped year-over-year in the suburbs, intra-market activity suggests that some tenants are becoming price sensitive, evidenced by the trend of tenants relocating out of the Main Line submarket into King of Prussia where Class A rents sat 17.7% lower than in the Main Line.
In the remaining portions of the metro, occupancy trended upward, but at a slower pace compared to 2016, except for Southern NJ where gains accelerated. This suggests future demand growth in these markets should persist, but at a more moderate pace.