Fearing a potential exodus, Center City District & Central Philadelphia Development Corp., the city's commerce department, and the Philadelphia Industrial Development Corp. are conducting a unified retention effort to not only get these companies to stay in Center City, but also to announce such intentions early.
Early announcements, positive or negative, are expected to have significant impact on the leasing market here this year and next, according to attendees at a real estate forecast meeting, hosted by the local office of Grubb & Ellis.
The seeds of the current scramble for commitments were planted between 1988 and 1992 when the city's four tallest buildings came to market, adding five million sf. They are One and Two Liberty Place, Mellon Center, and the Bell Atlantic Tower. Two more office buildings at Commerce Square added an aggregate 1.7 million sf to the market during that time.
Many of the initial tenants in these properties signed 15-year leases. "Decisions made this year are enormously important," says Wayne Fisher of Grubb & Ellis. He forecasts a reversal in the trend to short-term leases that took place 18 months ago and anticipates, "as the classes of '05 and '06 come to term," there will be more transactions with a minimum of 10 years and many with 12- to 15-year terms.
In addition to a lengthening of lease terms, beginning this year, Grubb & Ellis expects less aggressive concessions and a slowing of the decline in effective rental rates during 2003.
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