According to Bisnow Commercial Real Estate News, the second quarter of 2017 has been a strong quarter in King of Prussia for commercial office leasing, writes Eric Goldstein, the Executive Director of the King of Prussia District.
Despite the positive absorption reported by Bisnow, CoStar – a commercial real estate information and marketing provider with headquarters in Washington, D.C. – shows a rise in commercial office vacancy rates, although likely due to timing.
Overall, the commercial office vacancy rates closed at 15.2 percent, which remains three points lower than the same quarter in 2015. Average lease rates remained steady over the past two years with a slight increase to $24.69 per square foot in 2017.
The increase in average commercial office vacancy is due mostly to the rise in Class A office vacancy, which ticked up to 11.5 percent. This is an increase from 8.6 percent at the end of the same quarter in 2016 but still lower than the 14.4 percent from 2015.
However, similar to average lease rates, Class A lease rates stayed strong over that same period of time with an increase of $2.20 since the end of the second quarter of 2015 to $28.54 per square foot in the second quarter of 2017. A number of LEED-certified Class A buildings are reporting lease rates in the low to mid $30s.
Unfortunately, Class B office vacancy remains high. Class B has declined in the past year, however, by 3.7 percent to 24.2 percent at the end of the second quarter of 2017, which is certainly a move in a positive direction.
The average Class B lease rate has increased to $21.00 per square foot. This is in contrast to Class C office space, which has seen a surprisingly significant drop in lease rates by more than $4.00 per square foot.
Class C vacancy has dropped significantly, perhaps due in part to the value now being offered, from this time last year from 21.4 percent to 11.8 percent at the end of the second quarter of 2017.
The demand for industrial and flex space remains strong and closed the second quarter of 2017 at 2.8 percent with average lease rates of $7.21 per square foot.