Most Philadelphia office space brokers and investors consider Market Street West – the portion of Market Street running from City Hall to 21st Street – as Center City’s premier office district, and with good reason.
Public transit access is exceptional along that corridor, which is home to more than 12 million square feet of Philly office space; this is more than double the amount of office space located on other major Center City thoroughfares such as JFK Boulevard, South Broad Street, or Market Street East.
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However, Market Street West’s concentration of modern office skyscrapers has made it a favorite among large, publicly traded companies based in Philadelphia, a feature which is both a blessing and a curse for local office landlords dealing in Philadelphia office space.
Clearly, Market Street’s popularity among large tenants is a plus for landlords that can retain them. Giant long-term leases by companies such as Independence Blue Cross or Beneficial Bancorp help some office owners keep large portions of their Philly office space properties filled for years or even decades on end.
The problem is that thanks to high business costs, Center City’s Philadelphia office space does not have a strong track record when it comes to attracting and retaining large corporate headquarters. Many of Philadelphia’s largest white-collar employers such as Sunoco, Dow Chemical and PNC have all either vacated or downsized their Market Street office space in recent years as part of cost-cutting efforts.
The result is that, in terms of the percentage of office availability rates, Market Street West does not stand out as a particularly tight Philly office space market today.
The tightest Philadelphia office space micro markets (in terms of both physical vacancy rates and percentage of space listed as available for lease) are currently Rittenhouse Square and Logan Square. Both are located a few blocks off Market Street and are home to some of Center City’s most coveted public greenspaces.
In contrast to Market Street West, the bulk of Philly office space stock in the Rittenhouse Square area is comprised of office properties located along Walnut Street, smaller than 350,000 square feet and built before 1970.
These properties cater almost exclusively to tenants looking for Philadelphia office space of less than 15,000 square feet, often in industries like legal services, healthcare, and accounting. These mostly privately-held firms do not face the same scrutiny from public shareholders and as a result, are less likely to relocate out of Center City to cut costs.
From an owner’s perspective, one downside associated with owning these older, smaller Philly office space properties is the constant time and money spent shuffling tenants in and out, as having smaller tenants means more lease expirations.
However, these Philadelphia office space properties have maintained higher average occupancy rates in recent years than most of the newer skyscrapers along Market Street. As a result, available office space is also harder to find in and around Rittenhouse Square and Logan Square than it is in any other major office district of Center City.
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