As a consequence, "extra inventory had leasing agents scrambling to lure the few large tenants shopping for space," according to the latest Studley report. The average asking rents in class-A buildings west of Broad Street, such as Four Penn Center, Three Parkway and United Plaza dropped $0.41 per sf since the previous quarter, taking them to under $22 per sf.
"Rents were driven down further during lease negotiations and were often accompanied by an increase in free rent packages and tenant improvement dollars," the report states.
"Philadelphia's prestigious trophy-class office towers remained locked up. High-end sublease opportunities of the kind offered by PricewaterhouseCoopers, Ernst & Young LLP and Ace Insurance," the report says, "helped to end the class AA rent increases of the previous year, but the impact was limited."
The availability of those sublease opportunities may erode, however, Studley analysts note, because PwC and E&Y might take sublease space off the market as they take on clients from Arthur Anderson. At the same time, however, the report notes that Malvern, PA-based Liberty Property Trust "may set into motion a profound change in the class-A market if it can sign a lead tenant to its One Pennsylvania Plaza project."
One Pennsylvania Plaza is a planned 1.1-million-sf, 52-story tower, designed by architect Robert A.M. Stern. It was scheduled to break ground this May and see completion in 2004. It would be the first new office tower developed Downtown in more than a decade.
"Lead tenants large enough to anchor the project are expected to come from other trophy buildings in the CBD," Studley suggests. One Pennsylvania Plaza is one of two planned trophy buildings, scheduled for development here, but currently on hold.
The other is 30th Street Station, a 28-story, 500,000-sf office, conference and retail space, being developed by Plymouth Meeting, PA-based Brandywine Realty Trust and designed by Cesar Pelli, scheduled for completion in 2005.
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