Not all submarkets suffered alike. The vacancy rate for the CBD fell back to 13.2%, the same level as third-quarter 2002. "It remains five percentage points lower than the peak it reached in 1993 during the aftermath of the last recession," Guerrieri notes.
"No single tenant contributed significantly to the reversal in occupancy this quarter," he says. "But the cumulative effect of numerous tenants losing space resulted in the total vacancy rising above 5 million sf, a figure approximately 100% higher than during the CBD's tightest point in December 2000."
Metro Philadelphia's sublease space remained at a high of approximately 23% of the total vacancy. Guerrieri expects that to decrease this year as some original lease terms expire throughout the entire region.
While the Grubb & Ellis statistics show a climb in vacancy for all classes of office buildings in the CBD, "class-A2 vacancy rates escalated the most by 1.6%," Guerrieri reports. His firm refers to class-A2 as class-A "non-trophy" facilities. South Broad Street remained tight 6.2% vacancy. With just 166,000 sf available for lease, Guerrieri says it is the only CBD submarket to post positive absorption in first quarter.
Despite the rising vacancy, asking rents didn't drift, but effective rates were generally discounted at between 10% and 15% below quoted rates. The average asking rate in the CBD was $24.34 per sf. It ranges, however, from $30.29 per sf for a class-A1 trophy building to about $16.20 per sf for a class-B building west of Market Street.
Compared to the western suburbs, the CBD held up well, Guerrieri concludes and suggests "it has likely bottomed." At the same time, he says, "any drastic improvements are unexpected until the national economy begins a stronger recovery."
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