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Low Construction Stems Slide in Office Market

PHILADELPHIA-Although office vacancy rates in Philadelphia and surrounding submarkets will continue to rise this year, and asking rents remain flat, reduced construction levels are keeping the market intact, according to research from Marcus & Millichap.

By Marita Thomas | Updated on July 08, 2002

PHILADELPHIA-The overall vacancy rate in the office sector of the Philadelphia MSA will continue its current ascent and end the year at 13%, forecasts Jeffrey R. Algatt, regional manager of the local office of San Francisco-based Marcus & Millichap. The upward trend began, he says, in the first quarter of 2001.

“Average office vacancy rose to 11.3% by the end of last year. The 2.8 million sf absorbed in 2000 were almost entirely given back in 2001, as companies that grew aggressively or were stockpiling space for future expansion saw demand . . . plummet,” Algatt says. Despite these difficulties, “the region has held up well in comparison to other major markets.”

Completions, according to Marcus & Millichap analysts, will inch up slightly from 2.9 million sf in 2001 to 3 million sf this year, “spelling the end of the recent mini-boom in office construction.” Office starts, Algatt notes, were relatively high in this market each year since 1998. Currently, however, many planned projects have been put on hold.

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