Philadelphia Office Investment Forecast
Office Sector Improving Despite Uncertain Leasing Future;
Investment Activity Led By Suburbs
Office demand varies by industry as recovery lags behind national average. Philadelphia's economy is steadily trending upward heading into 2022, though total employment will end the year well below 2019 headcounts. Full office demand recovery may face headwinds as larger employers explore hybrid workplace options. Insurance providers State Farm and Optum Inc. were among the employers putting large blocks of space on the market, relinquishing a combined 450,000 square feet amid plans to transition employees to home offices. Demand, however, is rapidly growing in many industries unable to make this leap. Four of the 10 largest move-ins last year can be attributed to the national biotechnology boom. Iovance Biotherapeutics, B Lab, Century Therapeutics and Integral Molecular leased a combined 250,000 square feet in the Philadelphia city limits alone. The metro maintains a brighter outlook on the supply side. Less than half of the 1.6 million square feet scheduled for a 2022 delivery is available for lease entering this year, mitigating excess upward pressure on vacancy. Tenant preferences for top-tier offices will benefit this new space, contributing to this year's positive net absorption.