MARKETBEAT

OFFICE SNAPSHOT

PHILADELPHIA, PA - SUBURBAN

Q4 2014

A Cushman & Wakefield Research Publication

Cushman & Wakefield of Pennsylvania, Inc.

One Liberty Place, 33rd Floor
Philadelphia, PA 19103
www.cushmanwakefield.com/knowledge

For more information, contact:

Jared Jacobs, Research Manager
215 963 4077
Jared.Jacobs@cushwake.com

Y-O-Y
CHANGE

15.8%

16.2%

0.4pp

$23.61

$24.26

2.7%

3,096,495

3,692,036

19.2%

Overall Vacancy
Direct Asking Rents (psf/yr)
YTD Leasing Activity (sf)

12 MONTH
FORECAST

DIRECT RENTAL VS. VACANCY RATES

$24.40
$24.20
$24.00
$23.80
$23.60
$23.40
$23.20
$23.00

16.5%
16.0%
15.5%
15.0%
14.5%
14.0%
2010

2011

2012

DIRECT GROSS RENTAL RATE

2013

2014

DIRECT VACANCY RATE

LEASING ACTIVITY
4.0
3.0
2.0
1.0
0.0

3.7

The King of Prussia/Valley Forge submarket led the way with 1.1 msf
of new activity in 2014 with significant deals signed by Novartis
Corporation at 151 South Warner Road for 88,000 sf in King of
Prussia, Rovi Corporation taking 65,000 sf at CrossPoint at Valley
Forge in Wayne, and IFM Efector signing for a 45,000-sf build-to-suit
in the Atwater Corporate Center in East Whiteland. Other notable
deals signed throughout the Philadelphia suburbs in 2014 included
Lenox Corporation renewing for 100,616 sf at 1414 Radcliffe Street
in Bristol, Emoney Advisor taking 69,986 sf at 100 Matsonford Road

Q4 2014

3.1

Some of the most significant transactions of 2014 in the Philadelphia

suburbs were completed by tenants opting to redevelop or lease
from newly redeveloped office buildings. The largest lease of 2014
was signed by Saint-Gobain Corporation at 20 Moores Road in
Malvern for 320,000 sf. Formerly Aegon Groups corporate
headquarters, 20 Moores Road will become Saint Gobains new
North American headquarters and is undergoing an $80 million redesign prior to Saint-Gobains occupancy in the fall of 2015. In Blue
Bell, PRA International signed for nearly 150,000 sf at Hillcrest II and
III in Arborcrest Park. PRA International has already taken occupancy
of roughly 38,000 sf at Hillcrest II which was renovated in 2012 and
will occupy its remaining space at Hillcrest III once the renovation of
that building is complete in early 2015.

Q4 2013

2.5

STRONG DEMAND IN REDEVELOPED BUILDINGS

STATS ON THE GO

3.6

The overall vacancy rate for the Philadelphia suburban office market
increased slightly over the past 12 months from 15.8% year-end 2013,
to 16.2% year-end 2014. The overall vacancy rate had climbed to
17.1% in the first quarter of 2014 primarly due to Mercks 220,000
square foot (sf) vacancy at Arborcrest Park, however has steadily
declined since then. 2014 leasing activity closed the year at 3.7 million
square feet (msf), the highest year-end total in the suburbs since
2007. The only new construction to deliver in 2014 was the Vanguard
Groups 200,000-sf build-to-suit at Three Quarry Ridge in Malvern.

New speculative construction has been limited in the Philadelphia

suburbs over the past several years. Tenants looking for new class A
space options have been drawn to the number of newly redeveloped
buildings throughout the suburbs, evidenced by the robust activity
within that inventory. With the growing demand for class A space,
some submarkets could experience a return of new speculative
construction in 2015. In particular, there is 1.3 msf of office space
planned in the Conshohocken submarket and some of that planned
development could begin construction in 2015.

2.7

HIGHEST LEASING ACTIVITY SINCE 2007

OUTLOOK

psf/yr

The Greater Philadelphia regions

unemployment rate declined to 5.2% in the
fourth quarter of 2014, the lowest
unemployment experienced in the region since
May 2008. Philadelphias business service
(+2,800), education and healthcare (+2,600), and financial service
(+2,000) sectors all experienced positive job growth over the past 12
months. The US unemployment rate declined to 5.6% in December
2014, the lowest since 2008 and added nearly 3 million jobs to the
market over the past 12 months, the highest job growth since 1999.

in Radnor, and AmerisourceBergen Corporation signing for 69,260 sf

at Millennium III in Conshohocken.

msf

ECONOMIC OVERVIEW

2010

2011

2012

2013

2014

The market terms and definitions in this report are based on NAIOP standards. No
warranty or representation, express or implied, is made to the accuracy or completeness
of the information contained herein, and same is submitted subject to errors, omissions,
change of price, rental or other conditions, withdrawal without notice, and to any special
listing conditions imposed by our principals.
2015 Cushman & Wakefield, Inc. All rights reserved.

PHILADELPHIA, PA
SUBMARKET

INVENTORY

OVERALL
VACANCY
RATE
11.9%

DIRECT
VACANCY
RATE
11.4%

East of Broad

12,545,212

West of Broad
CBD

DIRECT WTD. AVG.

CLASS A GROSS
RENTAL RATE*

(73,552)

OVERALL WTD. AVG

ALL CLASSES GROSS
RENTAL RATE*
$24.18

415,294

28,344,638

10.6%

10.3%

2,417365

560,045

711,940

$26.85

$27.81

40,889,850

11.0%

10.6%

474,420

638,388

$25.83

$27.47

Bala Cynwyd

2,734,940

9.6%

47,474

40,955

$29.31

$31.09

Southern Bucks County

6,510,789

186,775

(101,931)

(118,711)

$23.71

$26.11

Southern Rte. 202 Corr.

12.5%

525,022

3,047

(68,877)

$21.73

$21.96

Delaware County

15.6%

15.5%

203,635

(79,761)

(84,761)

$24.99

$27.70

10,332,169

20.9%

20.1%

749,117

(167,648)

(223,796)

$23.08

$23.40

Main Line

3,441,057

5.3%

4.7%

256,270

60,838

62,334

$28.40

$31.09

Conshohocken

3,595,436

12.3%

11.7%

213,603

(76,573)

(90,228)

$31.41

$33.02

Horsham/Willow Grove/Jntwn

5,075,439

15.5%

14.3%

262,574

49,618

64,293

$22.15

$23.61

King of Prussia/Valley Forge

17,278,524

16.0%

15.1%

1,109,488

200,000

435,714

365,954

$24.27

$26.07

SUBURBAN PHILADELPHIA

58,390,839

16.2%

15.4%

3,692,036

200,000

170,778

(52,837)

$24.16

$25.68

Burlington County

7,954,642

11.5%

11.1%

413,194

(76,684)

(86,672)

$19.58

$23.47

Camden County

6,341,177

20.8%

20.6%

419,747

129,502

174,972

$19.95

$23.99

14,295,819

15.6%

15.3%

832,941

52,818

88,300

$19.81

$23.72

New Castle-Suburban

8,546,492

18.1%

17.9%

376,130

(71,012)

(71,699)

$21.11

$21.72

Wilmington CBD

6,701,270

19.0%

18.9%

206,201

106,546

95,578

$23.02

$26.34

NEW CASTLE CTY-DE TOTAL

15,247,762

18.5%

18.3%

582,331

35,534

23,879

$22.07

$23.99

Lehigh & Northampton County

6,589,442

12.0%

11.9%

117,481

(96,112)

(99,780)

$17.89

$20.36

87,934,420

16.5%

15.9%

5,107,308

200,000

259,130

59,342

$23.14

$25.25

14.2% 7,939,967

1,943,921

200,000

733,550

697,730

$23.73

$25.78

Blue Bell/Ply.Mtg./Ft.Wsh.

SOUTHERN NEW JERSEY

SUBURBAN

TOTALS**

YTD DIRECT
NET ABSORPTION

YTD OVERALL
NET ABSORPTION

(85,625)

1,943,921

2,832,659

1,943,921

8.8%

185,552

22.8%

21.8%

4,964,618

13.7%

4,457,867

128,824,270 14.8%

* RENTAL RATES REFLECT ASKING $PSF/YEAR

YTD
LEASING
ACTIVITY

UNDER
YTD
CONSTRUCTION CONSTRUCTION
COMPLETIONS

$26.18

**LEHIGH & NORTHAMPTON COUNTIES ARE NOT INCLUDED WITHIN THE SUBURBAN & PHILADELPHIA MSA TOTAL

MARKET HIGHLIGHTS
SIGNIFICANT 2014 LEASE TRANSACTIONS

SUBMARKET

TENANT

BUILDING CLASS

20 Moores Road, Malvern

Southern Route 202

Corridor

Saint-Gobain

320,000

Hillcrest II & III, Blue Bell

Blue Bell/Ply.Mtg./Ft. Wash.

PRA International

149,800

1414 Radcliffe Street, Bristol*

Southern Bucks County

Lenox Corporation

100,616

151 South Warner Road, King of Prussia

King of Prussia/Valley Forge

Novartis Corporation

88,000

100 Matsonford Road, Radnor

Main Line

Emoney Advisor

SIGNIFICANT 2014 SALE TRANSACTIONS

SUBMARKET

BUYER

PURCHASE PRICE / $PSF

1000 Continental Drive, King of Prussia

King of Prussia/Valley Forge

KBS Realty Advisors

$63,000,000/ $307

205,122

205 Great Valley Parkway, Malvern

King of Prussia/Valley Forge

Gramercy Property Trust Inc.

$28,400,000/ $154

184,500

1200 Atwater Drive, Malvern

King of Prussia/Valley Forge

Hayden Real Estate Investments

$23,000,000/ $151

SIGNIFICANT 2014 CONSTRUCTION

COMPLETIONS
Three Quarry Ridge, Malvern

SUBMARKET

MAJOR TENANT

COMPLETION DATE

King of Prussia/Valley Forge

The Vanguard Group

Q3 2014

MAJOR TENANT

COMPLETION DATE

SIGNIFICANT PROJECTS UNDER CONSTRUCTION SUBMARKET

SQUARE FEET

69,986
SQUARE FEET

151,477
BUILDING SQUARE FEET
(% LEASED)
200,000 (100%)
BUILDING SQUARE FEET
(% LEASED)

N/A
* RENEWAL - NOT INCLUDED IN LEASING ACTIVITY STATISTICS

Cushman & Wakefield of Pennsylvania, Inc.

One Liberty Place, 33rd Floor
Philadelphia, PA 19103
www.cushmanwakefield.com/knowledge

For more information, contact:

Jared Jacobs, Research Manager
215 963 4077
Jared.Jacobs@cushwake.com

The market terms and definitions in this report are based on NAIOP standards. No
warranty or representation, express or implied, is made to the accuracy or completeness
of the information contained herein, and same is submitted subject to errors, omissions,
change of price, rental or other conditions, withdrawal without notice, and to any special
listing conditions imposed by our principals.
2015 Cushman & Wakefield, Inc. All rights reserved.