In the post-pandemic hybrid-work environment, Philadelphia office space remains cheaper than most other major metro areas, according to a new report from the online real estate platform Commercial Cafe.
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Asking rents for Philly offices were $31.26 per square foot on average as of May, the report found. That makes Philadelphia the only major market in the Northeast below the national average of $33.61 per square foot.
Relative to other major U.S. markets, only Chicago, Houston, and Phoenix recorded lower average asking rents.
Elsewhere in the Northeast, Manhattan averaged the most expensive asking rents at more than $69 per square foot, according to the report. Boston’s asking rents were around $44 and New Jersey’s were more than $35.
Philadelphia’s 18.4% office vacancy rate, meanwhile, was slightly higher than the other Northeast markets, as well as the national average of 17.6%, according to the report.
The analysis, released last week, reflected the broader challenges that all office markets are up against. In Philadelphia and elsewhere, the office landscape has shrunk since the pandemic, with many employers downsizing their space amid the rise of hybrid work.
Some Center City office buildings have plummeted in value and are now becoming apartment complexes. Among them: The iconic Wanamaker Building and Centre Square, better known as the “Clothespin building” for the sculpture outside it.
Chubb’s new 18-story tower at 2000 Arch St. may be Center City’s last new office building for a while, local industry experts say.
Between January and May, $220 million in office sales were recorded in Philadelphia, according to the Commercial Cafe report, and $387 million in New Jersey. In the Garden State, 630,000 square feet of offices were under construction, found the report, which did not have under-construction data for Philadelphia.
Peter Kolaczynski, the director of Yardi Research, helped compile the report, and noted the trend toward office reuse.
“The destruction of value that we have discussed for years is showing through in the sales data,” Kolaczynski said in a statement. “With this decrease cost in acquisition comes opportunity — whether that is conversions to apartments, repositioning to best-in-class office and coworking, or full-on redevelopment and revitalization projects.”
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