The average class A asking rental rate in the overall CBD ticked up 20 cents per sf to $26.38 in the third quarter, versus $26.18 the quarter before. East of Broad class A rent in the third quarter was $27.71 per sf, a three-cent drop from second quarter results, while the rate West of Broad remained unchanged at $27.12 per sf.
Transactions are closing at significantly lower rates, however. C&W reports, "a 10-year deal in a class A building, for an entire floor, with tenant improvement dollars averaging between $20 and $25 per sf, will typically close at an average effective rate in the low $20s per sf,"
Office absorption was a positive 126,800 sf in third quarter, which represents significant improvement in comparison with a negative 389,283 sf in the previous quarter of this year. The improvement, however, was largely due to a single new Center City tenant, American Business Financial Services, which moved into 234,800 sf in the Wanamaker Building.
Overall vacancy rates for the East of Broad St. submarket dropped from 13.7% at mid-year to 12.9% in third quarter, according to C&W, while vacancy increased very slightly West of Broad to 13.8%, versus 13.7% in the previous quarter.
Fourth quarter seems destined for increased activity. Many tenants are waiting to see which large companies will commit to staying in the CBD. Cigna, Aramark, Comcast and Sunoco are among the large tenants with leases expiring between 2005 and 2008, and they are expected to begin to show their intentions by the end of this year.
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