Like the hottest restaurant in town, where you just can’t seem to get a table, office tenants aspire for a centrally-located seat along Philadelphia’s storied Main Line, or right next to it, but can’t find the space at a price they like, writes cbreemail.com.
The “premier” suburban office submarkets (Main Line, Conshohocken, Bala Cynwyd) are operating at record-occupancy and asking record-rents. As figure 1 shows, the asking rent premium for these premier submarkets (the difference between asking rents in the premier submarkets and the rest of the suburban office market) continues to grow. It is a sign of the increasing disparity in the suburban office submarkets between the “haves” and “have nots.”
So, companies are adjusting.
Most notably, we have observed “overflow” to adjacent locations such as East Swedesford Road in King of Prussia and Newtown Square. But the spillover from the premier submarkets is spreading farther.
Due to this shift in tenant preference, the King of Prussia/Valley Forge submarket has clearly experienced the greatest increase in occupancy and rents over the last year. And though a lesser share of tenants are seeking space in the premier suburban markets, there’s certainly still enough to cause strong market fundamentals and rising rents.
At the same time, trends suggest that the sluggish office submarkets in the northern suburbs will benefit. There is little chance of any new office supply in any of the suburbs over the next 18 months, and office-using employment is forecast to continue growing, suggesting demand for office space will increase and vacancy rates tighten.
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