Looking ahead, Philadelphia is poised for a strong second quarter, the report noted. With very little construction in the pipeline mixed with low availability rates, vacancies will gradually drop, thus resulting in an increase in rental rates. A combination of these factors suggests the market will remain tight.

Among the other findings of the report:

In Center City, the central and non-central business districts are comprised of more than 62 million square feet of office space at an 8% vacancy rate. Spanning less than five square miles of space, the Center City market is a highly concentrated and competitive market.

In University City, a part of the non-CBD, health and educational institutions drives the market. In the heart of this area, Amicus Therapeutics, a global biotechnology company, signed a 75,000 square-foot lease at Wexford Science and Technology's class A lab and office building. The facility will be home to 200 employees and will serve as the company's global research and gene therapy of excellence. Other major tenants providing ongoing demand in the University City submarket include the University of Pennsylvania, the University of the Sciences of Philadelphia and the Children's Hospital of Philadelphia.

On the other hand, the central business district of Philadelphia, which includes Market Street East, Market Street West and Independence Hall, account for 184 office buildings and holds more than 54 million square feet of space. Class A asking rates continue to increase, but that has not stopped tenants from occupying newly renovated space in the submarket. In Market Street East, a local architecture firm, Ballinger, renewed its 78,951-square-foot lease at 833 Chestnut Street during the first quarter of 2019. Additionally, other large tenants host their headquarters in this submarket such as Five Below, Comcast, and Aramark.

Suburban Philadelphia consists of 18 submarkets, including Southern New Jersey. A majority of the suburban Philadelphia office submarkets enjoy convenient location, good accessibility to the city and lower asking rental rates compared to space in Center City. Rental rates throughout the suburban market range from a high of more than $36.00 per square foot to just over $18.00 per square foot. Factors that tend to influence rates in the suburban submarkets include the age of the building, accessibility, and surrounding amenities.

Conshohocken holds the highest average asking rental rate at $36.63 per square foot as well as the highest average asking rental rate for class A space at $36.77. AmerisourceBergen signed a 400,000-square-foot office lease at SORA West in Conshohocken during the first quarter of 2019. The class A space is located steps from the SEPTA Regional Rail line, giving it excellent accessibility and easy transportation to and from Center City Philadelphia. Furthermore, another submarket to watch is the King of Prussia / Wayne submarket, as CSL Behring just signed a lease for 100,820 square feet and SEL also signed a new 27,000 square-foot lease.

“Conshohocken and Radnor have always been strong,” Fahey says. “Currently, there is new construction occurring in both submarkets, and I think that these submarkets will remain strong and rental rates will strengthen as well. Additionally, I believe we will see a 'spill over' effect (from Conshohocken and Radnor) that will strengthen nearby submarkets such as King of Prussia.”