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Significant TIs Erode Office Rental Rates

PHILADELPHIA-Although average CBD asking rates inched up to $26.38 per sf in the third quarter, according to C&W research, the average effective rate on a 10-year, full-floor, class A lease is in the low $20s per sf.

By Marita Thomas | Updated on October 30, 2003

PHILADELPHIA-Despite minimal economic growth in the CBD during third quarter, unemployment improved from 8.3% in January to 7.9%, just enough to help “push a moderate recovery in the real estate sector and slow the negative trends that have been prevalent through the market in 2003,” according to the latest research from the local office of Cushman & Wakefield.

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,”

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