Characterizing the overall suburban office market as "very strong," Dan Dagit, senior vice president in the Wayne office of CB Richard Ellis, tells GlobeSt.com, "vacancy is falling to 15%, fueled primarily by expansion of the existing tenant base. The markets are in recovery. While it's still a tenants' market," he says, "the tipping point will occur this time next year." Fort Washington, a once-languishing submarket, was among the most active in 2006, he says and credits much of its success to a 450,000-sf lease by Horsham-based ResCap, GMAC Mortgage Corp.'s residential real estate lender.
Eight of the 11 suburban submarkets tracked by Wayne-based GVA Smith Mack recorded absorption in the final quarter of 2006, according to Tim Pulte, the firm's executive managing director. "Increased stabilization along with increased rents has strengthened the position of landlords," he says.
New spec buildings, including BPG Properties' 1000 Continental in King of Prussia and Brandywine's Metroplex in Plymouth Meeting, "indicate a healthy market for class A space," he says. These and other class A properties are pushing rates "well above $30 per sf," he notes.
The local office of Grubb & Ellis put the overall suburban vacancy at 16% at year-end 2006. Matthew Wright, research services manager, notes that is a 4.7%-drop over the past two years.
All three men note a flight to quality, which Dagit says "is depleting class A space." The priciest of the submarkets are Conshohocken and Bala Cynwyd, with class A asking rates of $32.52 per sf and $32.29 per sf, respectively, according to Grubb data. Fort Washington is the least costly at an average of $23.12 per sf. This compares with an overall suburban average asking rate of $26.93 per sf for class A office space.
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