Jones Lang LaSalle

Slow Office Recovery Mars Philadelphia Commercial Real Estate Performance
January 17, 2006
By Michael Fickes, Mid-Atlantic Correspondent

As commercial real estate markets across the nation gain momentum, Philadelphia markets have mostly kept pace--except for the office market."We're seeing vacancy reductions and rent growth in some national markets," Robert Walters (pictured), senior managing director of the metropolitan Philadelphia office of C.B. Richard Ellis told CPN this afternoon. "But Philadelphia typically lags two- to three-quarters behind other office markets."

A CB Richard Ellis research report on Philadelphia noted that the city's downtown vacancy rate edged up toward 12 percent last year, while Class A lease rates inched down toward $22.50. Not so in other Philadelphia commercial real estate categories: Walters said that Philadelphia's industrial markets "stand shoulder to shoulder" with the strongest industrial markets in the country.Likewise, retail is keeping pace with key national markets. "We're seeing higher sales-per-square-foot numbers on Walnut Street in Philadelphia than Newberry Street in Boston," Walters said.

The region's multi-family segment is also booming, with high levels of activity in both condominium conversions and investment sales, thanks perhaps to the high barriers to entry that characterize the region's multi-family market.During 2006, Walters believes that Philadelphia's multi-family, retail and industrial markets will continue to grow, with the office market starting to catch fire late in the year or early in 2007.