According to Grubb & Ellis, the Philadelphia region’s commercial office market continued to soften significantly during the first three quarters of 2009 as layoffs, and the accompanying fall in office-using employment reduced the demand for office floor area. The office market was characterized by the following trends:

• The region-wide total Class A rental rate in the 3rd quarter of 2009 was $27.55 per square foot, virtually unchanged from 2008q3 and down from the peak of $27.83 in 2008q1.
• Class A vacancy rates rose steadily throughout the year, with the region’s figure reaching 13.6% in 2009q3, up from the 13% rate of a year ago. Class A vacancy rates rose in all the office sub-markets during the year, reaching 13.5% in the Philadelphia CBD and PA suburbs, and 13.7% in Wilmington and South Jersey.
• The total vacancy rate across all classes were even higher in 2009q3, ranging from 12.6% in the Philadelphia CBD and 16.4% in South Jersey to 17.7% in Wilmington and 18.4% in the Pennsylvania suburbs.
• Total net absorption* across the region was -1.44 million square feet during the first three quarters of the year, with only the Wilmington sub-market having positive net absorption.
• Grubb & Ellis estimated that only 473,400 square feet of office space was under construction in 2009q3, the lowest figure in the last four years, and well below the peak of 3.1 million square in 2006q3.

Source: Grubb & Ellis, March 2010.