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Glut of Suburban Office Space Dampens Region's Recovery

PHILADELPHIA-While the CBD posted positive space gains in third quarter, the city's western suburbs suffer from "mistimed construction," a glut of sublease space and some corporate relocations, according to Grubb & Ellis data.

By Marita Thomas | Updated on November 25, 2003

PHILADELPHIA-While the office vacancy rate in the CBD stood at 12.5% at the end of third quarter, the rate in the surrounding suburbs reached 22.7%. Taken together along with an 11.6% office vacancy in Southern New Jersey, and a 21.2% vacancy in Delaware, Matthew Guerrieri, senior research director of the local office of Grubb & Ellis, says the flood of suburban office space is dampening recovery for the overall metro region.

“Metro Philadelphia’s vacancy has eclipsed levels seen during the wake of the last recession in the early 1990s,” he says. As a result, TI allowances of as much as $40 per rentable sf and increasing amounts of rent abatements are being offered in order for landlords to remain competitive, Guerrieri reports.

On the positive side, speculative construction is subsiding in the western suburbs with just a handful of properties scheduled for completion in 2004. This, combined with a rising economy, points toward a recovery in the office leasing market by the close of 2004, he predicts.

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