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12-month
change:
+3.9%
12-month
change:
+0.4%
12-month
change:
+5.9%
$35.00
$30.00
12-month
change:
+4.1%
$25.00
$20.00
$38.18 $39.66
12-month
change:
+3.7%
$37.99 $38.15
$15.00
$27.95
$29.61
$27.07 $28.19
$24.11 $25.00
$10.00
$5.00
$0.00
Navy Yard
University City
Average asking rent Q1 2015
Market West
CBD Total
Market East
All CBD submarkets saw asking rental rate growth throughout 2015. University City stayed flat with very
few spaces available and the under-construction FMC Tower not factoring into 2015 analysis. Major
2015 lease announcements across Market West A and Trophy buildings helped drive asking rates up as
overall availability constricts. New inventory and greater tenant demand may yield record rates in 2016.
Source: JLL Research
Philadelphia
Chart of the week: January 11, 2016
18.0%
16.0%
Market West
Navy Yard
University City
15.7%
14.0%
13.9%
Availability rate
12.7%
12.0%
11.7%
10.0%
8.0%
6.0%
4.0%
2.0%
3.9%
3.0%
3.2%
2.3%
0.0%
2015 Q1
2015 Q2
2015 Q3
2015 Q4
Availability conditions continued to tighten across the CBD in 2015 as expansions and net new demand
took down significant square footage from the market, particularly as a result of several large
transactions in Market West. Dows announced departure from 100 S Independence Mall West
returned one of Market Street Easts largest blocks to the market, increasing availability here despite
otherwise tightening conditions.
Source: JLL Research. *Buildings under construction not included
Philadelphia
Chart of the week: January 18, 2016
5
15
10
8
4
1
7
2
9
11&12
14
1)
2)
3)
4)
5)
FMC Tower
East Market Phase I
Rodin Square/Dalian
1919 Market
Museum Towers II
6)
7)
8)
9)
10)
11)
12)
13)
14)
15)
1221 S. Broad
1200 Intrepid
Sugar House expansion
Pennovation Phase I
LDS Temple
With so many cranes dotting the Philadelphia skyline, it can be difficult to keep track of construction.
While some of the highest-profile projects (Comcasts new tower, the Gallerys reinvention, the Divine
Lorraine) wont welcome new users until 2017 or beyond, the above map shows developments of
50,000 square feet and up that are certain (or at least very likely) to open in 2016. The coming year
promises 4.3 million square feet of a mix of office, residential, retail, hotel, and institutional uses.
Source: JLL Research
Philadelphia
Chart of the week: January 25, 2016
2015 Absorption
82.5%
of 2015s positive
absorption
occurred in
51.6% of
3
the markets
square footage
4
1
1. Malvern / Exton
413,659 s.f.
2. King of Prussia /
Wayne
253,746 s.f.
3. Plymouth Meeting /
Blue Bell
237,351 s.f.
4. Conshohocken
125,883 s.f.
5. Radnor
16,352 s.f.
1,046,991 s.f.
1,268,416 s.f.
Suburban Philadelphia ended 2015 with a five-year high in positive absorption. The five Core Suburban
Philadelphia submarkets (Conshohocken, King of Prussia / Wayne, Malvern / Exton, Plymouth Meeting /
Blue Bell and Radnor) accounted for 1,046,991 out of 1,268,416 square feet of positive absorption, or
82.5 percent of absorption for the 14 Suburban Philadelphia submarkets. With the exception of King of
Prussia / Wayne, each of these Core submarkets is sub-eight percent vacant for Class A space.
Source: JLL Research
Philadelphia
Chart of the week: February 1, 2016
19,343,415
11.1%
10.5%
12.0%
10.3%
10.0%
16,000,000
8.0%
12,435,552
6.8%
12,000,000
9,638,814
6.0%
6.4%
8,000,000
5,431,000
Vacancy rate
7.8%
4.0%
5,404,459
4,000,000
2.0%
2010
0.0%
2011
2012
2013
2014
2015
Vacancy
Landlord-favorable conditions in the Philadelphia industrial market existed throughout 2015 and are
expected to continue into 2016. Average asking rents have increased and vacancy continues to
decrease, all while tenant demand remains strong. As a result, developers continue speculative
projects, which now account for 75 percent of all active construction. While a few vacant deliveries have
given the market some pause, limited quality options in desirable locations will support leasing
momentum over the next year as economic growth is expected to continue.
Source: JLL Research
Philadelphia
Chart of the week: February 8, 2016
2014
+160 bps
+130 bps
28.9%
29.6%
29.9%
+100 bps
23.7%
24.3%
25.0%
30.7%
31.5%
32.3%
+200 bps
28.3%
29.7%
30.4%
New York,
NY
+240 bps
31.2%
32.4%
33.6%
Chicago, IL
+240 bps
24.9%
26.7%
27.4%
33.4%
34.7%
35.9%
25.0%
+250 bps
22.6%
24.3%
26.0%
30.0%
+340 bps
+260 bps
33.3%
34.5%
36.0%
40.0%
35.0%
2012
+320 bps
36.6%
38.2%
39.7%
45.0%
2010
40.3%
42.0%
44.4%
50.0%
20.0%
15.0%
10.0%
5.0%
0.0%
San Diego, Philadelphia, San Jose,
CA
PA
CA
With February 2016 unemployment at 4.9 percent and unemployment for individuals holding a
Bachelors degree or more hovering at 2.5 percent, slack in the U.S. labor market is at an all time low.
Employers looking to attract and retain the best and brightest are increasingly differentiating themselves
from their competition based on their real estate, including location and amenities. The City of
Philadelphia is well-positioned to capitalize on the war for talent: between 2010 and 2014, Philadelphia
added 48,155 people with Bachelors degrees, a rate second only to San Diego among the 10 largest
cities in the country.
Source: JLL Research, U.S. Census Bureau. *Note: 2014 most recent ACS data available
Philadelphia
Chart of the week: February 15, 2016
17 TIMs
24 TIMs
30 TIMs
1
90%
7 TIMs
17 TIMs
1
2
8
80%
Tenant requirements
70%
3
60%
3
30%
10%
0%
4
1
3
1
Lehigh Valley
20%
50%
40%
1
Central Pennsylvania
Retail
Auto Parts
Durable Consumer Goods
I-81 Corridor
Philadelphia
E-Commerce
Biotech/Pharma
Industrial Supply
Strong industrial tenant demand in the Greater Philadelphia market is contributing to low vacancy, high
speculative construction, and increasing rental rates. While manufacturing currently makes up a full 20
percent of all tenant requirements, a look at tenant demand by submarket reveals a more nuanced
picture. In the Lehigh Valley, for example, third-party logistics providers make up 27 percent of the
demand base, whereas tenants in retail and food & beverage make up nearly 50 percent of the demand
base in the I-81 Corridor. Further, food & beverage requirements represent the largest transactions in the
market, averaging 618,750 square feet per tenant.
Source: JLL Research
Philadelphia
Chart of the week: February 22, 2016
The Waterfront
In the Lehigh Valley, Allentown has two office development projects in the construction pipeline that can
deliver over one million square feet of much needed Class A office space in a market that lacks large
blocks of contiguous space. Five City Center, following the success of Two and Three City Center, offers
400,000 square feet of Class A office in downtown Allentown and will begin construction in August. To
the east but still in Allentowns neighborhood innovation zone (NIZ), The Waterfront offers six office
buildings totaling 610,000 square feet as part of a 26-acre mixed-use office, residential and retail
development. This project should break ground in 2016 with the pending signing of a large corporate
occupier.
Source: JLL Research
Philadelphia
Chart of the week: February 29, 2016
National operator
350,000
300,000
Other
26%
290,877
250,000
200,000
146,527
Joynture
4%
185,000
150,000
134,000
127,000
Regus
12%
100,000
144,350
Industrious
8%
MakeOffices
22%
Benjamin's
Desk
15%
WeWork
14%
134,000
50,000
58,000
0
Open
Under
Construction
Proposed
One year ago, our Chart of the Week showed 228,000 square feet of coworking space operational or in
development throughout the CBD. The market has surged in the past year surpassing all expectations,
with the expansion and arrival of more out-of-market operators. Joynture will occupy the Pearl Arts
building on South Street, while WeWork executed a lease for 40,000 square feet at 1601 Market. This
sets WeWork up direct competition with MakeOffices multi-floor space at nearby Seven Penn Center
and a larger battle for overall market dominance (a third potential MakeOffice location east of Broad
would put it squarely in the lead). The ability of local operators to compete, the emergence of
specialized facilities such as Plexus (med-tech coworking), and tenant mix will all be worth watching in
the months ahead.
Source: JLL Research
Philadelphia
Chart of the week: March 7, 2016
Central Pennsylvania
8,142,118 total s.f.
105,432
2,731,874
1,263,256
1,573,001
Vacant
Leased
4,506,402
Vacant
Leased
8,036,686
Vacant
Leased
Developers have broken ground on more than 18 million square feet of speculative industrial space
since 2014 across three of Philadelphias most dynamic industrial submarkets. Of these, Central
Pennsylvania has seen the least amount of lease-up, with only 1.3 percent of recent speculative space
signing tenants. The Lehigh Valley and Southern New Jersey have fared significantly better, with 38 and
45 percent of the speculative product in those markets already leased. While pending deals with large
users will move the dial in Central PA, demand for new construction is currently stronger in the Lehigh
Valley. This area has been gaining as a logistics hub thanks to its strategic distribution location along
major highways and close proximity to both New York and Philadelphia.
Source: JLL Research
Philadelphia
Chart of the week: March 14, 2016
2014
+11.8%
$1,200,000
$1,000,000
7.3%
$1,423,173
$1,400,000
$1,273,014
+3.3%
$273,386
+1.4%
$269,553
$298,146
+4.4%
$285,666
$353,710
+10.3%
$320,598
$358,469
+4.0%
$344,795
$435,583
+5.1%
$414,619
$454,944
+22.8%
$370,535
$200,000
$460,154
$400,000
+26.1%
$365,048
$540,113
$600,000
$557,745
$800,000
$797,697
+0.3%
$795,244
$1,600,000
$0
New York
MSA
Los Angeles Chicago MSA Dallas MSA Houston MSA Washington, Philadelphia Boston MSA Atlanta MSA Miami MSA
MSA
DC MSA
MSA
Gross metropolitan product (GMP), or the value of all goods and services produced within a metropolitan
statistical area (MSA), is one way to measure the productivity of a regional economy. Since the last
recession began, Philadelphias GMP has grown 4.0 percent, from $344.8 to $358.5 billion on a real
basis. Despite this growth, however, productivity in U.S. metropolitan areas averaged 7.3 percent, and
most peer regions in the 10 largest markets averaged significantly higher productivity growth. This
fundamental economic indicator helps to explain why the regions real estate market has expanded but
not at the same break-neck pace as places like New York, Dallas, Houston, and Boston.
Source: JLL Research, U.S. Bureau of Economic Analysis
Philadelphia
Chart of the week: March 21, 2016
5,051,974 s.f.
2,542,291 s.f.
18,790,491 s.f.
1,296,201 s.f.
Class B
Market East
3,343,630 s.f.
Class A
2,121,874 s.f.
Trophy
No Concourse Access
7,108,062 s.f.
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Of the 89 buildings JLL tracks in Market East and Market West, 22 of them (or 35% of the leasable
inventory) have a physical connection to the citys vast underground concourse system that allows
commuters to reach subways, trolleys, and commuter trains without braving the elements. While the
connection of 14.3 million square feet of office space to the transit network is impressive, convenient,
and frequently marketed as a differentiator to tenants, there is no obvious relationship between
concourse access and rents except among Class B buildings. B buildings with concourse access have
rental rates 8 percent above those without, while average rates in A and Trophy buildings are essentially
the same with and without concourse access.
Source: JLL Research
Philadelphia
Chart of the week: March 28, 2016
45
229,124
38
41
40
36
206,065
34
35
167,585
30
150,000
25
123,209
114,742
20
100,000
Number of Deals
200,000
15
44,225
50,000
10
6
5
2
0
0
The Lehigh Valley
I-81 Corridor
Philadelphia &
Suburbs
Delaware
While the Philadelphia industrial market is experiencing strong leasing velocity across all major
submarkets, lease sizes and deal flow vary significantly from submarket to submarket. The Lehigh Valley
and Central Pennsylvania both averaged over 200,000 square feet per deal during 2015 and 2016 YTD,
while Southern New Jersey leads the region with 41 deals signed. Philadelphia and its suburbs are also
very active yet significantly smaller, completing 34 leases over this timeframe but averaging only 114,742
square feet. These variables help to explain some of speculative construction and why projects are
beginning to take additional time to lease up.
Source: JLL Research
Philadelphia
Chart of the week: April 4, 2016
3.2%
2.6%
2.3%
2.0%
0.9%
0.3%
0.2%
Burlington County, NJ
Bucks County, PA
Delaware County, PA
Cecil County, MD
Gloucester County, NJ
-3.0%
Montgomery County, PA
-2.0%
Philadelphia County, PA
-1.0%
Chester County, PA
0.0%
-0.5%
Salem County, NJ
1.0%
Camden County, NJ
1.2%
3.0%
-2.8%
-4.0%
While incredibly strong population growth in the Washington, DC metropolitan statistical area (MSA) may
have overtaken Philadelphias position as the seventh largest MSA, a closer look at county level data
from the Census Bureaus population estimates program reveals that slower growth can mainly be
attributed to Southern New Jersey. New Castle County, DE, Chester County, PA, the City of Philadelphia,
and Montgomery County, PA all grew 70 to 170 basis points faster than the regional average. Growth in
these counties compares favorably to the New York MSA, which grew three percent 2010-2015, and the
Chicago MSA, which grew 0.8 percent over the same time period.
Source: JLL Research, U.S. Census Bureau
Philadelphia
Chart of the week: April 11, 2016
Market West
Market East
Philadelphias Indego bikeshare system celebrates its first birthday on April 23. Of the 429,710 trips
logged in calendar year 2015, more than a third occurred on weekdays between 7AM-10AM and 4PM7PM, implying strong usage by commuters to CBD jobs. While the purpose of each trip is not knowable,
it is telling that the top 15 AM destinations are nearly identical to the top 15 PM origin stations, and all of
them are within blocks of the largest office and medical employment nodes in Market East, Market West,
and University City. In 2015, more than 34,000 bike trips ended at these stations during morning rush,
and more than 40,000 bike trips started at these stations during evening rush. Happy Birthday, Indego!
Source: JLL Research, Indego
Philadelphia
Chart of the week: April 18, 2016
Large blocks of industrial space are still in high demand: there are currently 19 tenant requirements
seeking a minimum of 500,000 square feet. In response to this expanding demand, mainly from ecommerce and 3PL occupiers, nearly 14 million square feet of warehouse and distribution space is
currently under construction. However, there are also currently six new buildings over 500,000 square
feet still fully vacant. With only three buildings completed before 2015 that have vacancies of 500,000
square feet or larger, the six highlighted buildings above hope to lease up before years end.
Source: JLL Research
Philadelphia
Chart of the week: April 25, 2016
Radnor
Conshohocken
Bala Cynwyd
Plymouth Meeting/Blue Bell
King of Prussia/Wayne
Philadelphia Suburbs
Fort Washington
Malvern/Exton
Lower Bucks County
Delaware County
Valley Forge/Norristown
Horsham/Willow Grove
Central Bucks County
West Montgomery County
$35.11
+1.3%
$34.66
$33.03 +0%
$33.03
$31.25
$31.24 +0%
$29.57 +1.8%
$29.06
$28.45 +2.4%
$27.78
$27.06
$26.81 +1.0%
$26.76 +1.9%
$26.25
$26.50
-4.7%
$27.80
$26.39
-5.0%
$25.15
$25.72
$25.42 +1.2%
$25.24
$21.26
$22.47 +0%
$22.51
$20.05
$20.57 -2.5%
+18.7%
2016 Q1
2015 Q4
1.15 million square feet of positive Class A absorption in the Pennsylvania suburbs since the beginning of
2015 has driven market vacancy rates to historic lows. At 11.3 percent total vacancy at the close of Q1
2016, with half of all submarkets sub-nine percent, already limited tenant options for high quality space
continue to dwindle, enabling landlords to raise asking rents at renovated, well-located assets. Where
CBD rents increased 0.9 percent quarter over quarter, average asking rates in the Pennsylvania suburbs
increased 2.4 percent, with core suburban submarkets and redevelopment activity in Horsham/Willow
Grove driving the majority of this increase. While new construction will create additional options in late
2017, we expect landlord favorable conditions to continue through the remainder of the year.
Source: JLL Research
Philadelphia
Chart of the week: May 2, 2016
Vacancy
Vacancy
7.0 m.s.f.
395,000 s.f.
5.6%
40.0 m.s.f.
3.6 m.s.f.
8.9%
Just how scarce is high-rise space? While 18 percent of the 40 million square feet of office space in
Market East and Market West exists at or above the 25th floor, the vacancy at these heights (around
395,000 square feet) accounts for only 11 percent of the total vacancy between the two rivers. The
vacancy rate above the 25th floor (5.6 percent) is significantly below the total vacancy rate for these
combined submarkets. Said another way, high-rise vacant space makes up just under one percent of the
total rentable square footage in Market East and West. Qualitatively, high-rise space is further challenged
by its distribution: there are only six full high-rise floors available and only a half dozen more spaces of at
least 10,000 square feet.
Source: JLL Research
Philadelphia
Chart of the week: May 9, 2016
Annual
Growth
$5.10
$4.90
$4.70
$4.50
$4.30
$4.10
$4.38
$3.90
$4.03
$3.95
$3.92
$3.70
$3.72
$4.95
+3.1%
$4.75
$4.63
+4.9%
$4.43
$4.31
+4.5%
+3.5%
+2.2%
$3.50
2012
Lehigh Valley
2013
Central Pennsylvania
2014
Philadelphia Market
2015
Southern New Jersey
2016
I-81 Corridor
Class A industrial asking rents have grown rapidly over the past four years, with Central Pennsylvania
leading the way. While the Lehigh Valley has the highest asking rent of all the submarkets, Central
Pennsylvania and Southern New Jersey have seen the largest increases at 21.2 percent and 19.1
percent, total, and 4.9 percent and 4.5 percent annually. Central Pennsylvanias growth has been
impressive, but vacant speculative deliveries will likely slow rental rate appreciation in 2016 as quality
options for tenants continue to increase. Southern New Jerseys average asking rent will most likely
experience the largest growth in 2016 as Class A vacancy continues to decline and most new
construction is highly pre-leased upon delivery.
Source: JLL Research
Philadelphia
Chart of the week: May 16, 2016
350,000
552,218
538,265
531,569
Share of
regional
jobs
Boston MSA
512,839
464,839
498,692
20.9%
447,690
494,780
15.5%
402,380
400,000
390,583
450,000
437,547
500,000
452,792
16.6%
430,753
472,514
550,000
516,487
Share of
600,000 regional jobs
376,820
20.6%
Philadelphia MSA
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
300,000
Eds and meds are consistently recognized as the driving force behind the Philadelphia regional economy,
and with good reason: more than a half million jobs are tied to the healthcare and education sectors,
comprising nearly 21 percent of all regional jobs. But just how strong are eds and meds compared to a
peer region like Boston? A comparison of job growth over time demonstrates that although eds and meds
jobs have grown faster in Boston (2.4 percent annually on average since 2001, versus 1.8 percent in
Philadelphia), Philadelphia still has not only a larger total number of eds and meds jobs but a greater
concentration as well. This concentration of economic activity in a recession proof sector will help to
buoy the region and real estate market in the next downturn.
Source: JLL Research, U.S. Bureau of Labor Statistics
Philadelphia
Chart of the week: May 23, 2016
Inbound Suburbs
10.3%
Philadelphia
Chart of the week: May 30, 2016
7.2%
2.2%
17.3%
6.5%
5.3%
3.3%
3.6%
9.5%
10.4%
7.9%
8.8%
11.6%
30,000,000
28,293,056
27,000,000
22.7%
27.6%
60%
40%
34.9%
24,000,000
21,000,000
73.3%
57.6%
50.7%
20%
39.6%
18,000,000
100%
15,863,404
0%
15,000,000
2013
Central PA
Lehigh Valley
2014
Southern NJ
2015
I-81 Corridor
2016
3PL Occupancy
Third party logistics (3PL) leasing has grown each year in Philadelphias industrial market since 2013 by
approximately 15.5 percent, with Allen Distribution, OHL, FedEx Ground, and UPS growing most rapidly.
Currently, there are 3.6 million square feet of 3PL requirements in the market, and this level of velocity is likely
to continue in the near future. While 3PL providers were largely concentrated in Central Pennsylvania four
years ago, occupancy is now more distributed throughout the rest of the Philadelphia market. The I-81
Corridor, which had zero percent submarket share of 3PL tenants in 2013, now has a 10.4 percent submarket
share, and Lehigh Valley has grown from 17.3 percent of 3PL market share to nearly 35 percent.
Source: JLL Research
Philadelphia
Chart of the week: June 6, 2016
$800
188,190
$707
180,000
$700
166,911
$600
140,000
$575
$500
120,000
100,000
80,000
99,955
$400
$373
$344
74,234
$300
60,000
160,000
$200
40,000
$100
20,000
0
$0
2013
2014
2015
2016 YTD
Its no secret that Center Citys high street retailer corridors (Walnut Street and Chestnut Street, west of
Broad Street) continue to boom as downtown adds both millennial and empty nester residents and
continues to attract jobs. According to the Center City District, nearly 30,000 pedestrians walk Center
Citys high streets daily at peak times of the year to shop, dine, and commute to work. Recent high street
retail trades demonstrate investor bullishness in Philadelphia high street retail as well. With three asset
trades year-to-date averaging more than $700 per square foot, 2016 is well on its way to record-breaking
pricing for prime retail downtown.
Source: JLL Research
Philadelphia
Chart of the week: June 13, 2016
6,195
5,875
6,000
Wage and Salary Jobs
6,345
5,500
5,000
4,500
4,000
4,154
3,897
3,775
3,801
3,500
3,000
2,500
2,000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
The most expensive office submarket in the Pennsylvania suburbs of Philadelphia has also seen the
most dramatic job growth on a percentage basis coming out of the recession. 2014 data (the most recent
available) show total jobs swelling 52.7% above the 2008 peak. This dramatic growth rate is a factor in
Delaware Countys standing as the best-performing county post-recession, with 2.5% overall job growth
above the previous peak. Radnors relatively small number of suitable office development sites may
serve to constrain job growth in the future.
Source: JLL Research, U.S. Census Bureau
Philadelphia
Chart of the week: June 20, 2016
4,895,760 s.f.
59.5% 3PL
3,322,713 s.f.
44.5% 3PL
1,015,534 s.f.
29.4% 3PL
319,580 s.f.
42.2% 3PL
734,019 s.f.
9.3% 3PL
1,775,665 s.f.
47.8% 3PL
The e-commerce explosion has impacted many industrial industries such as food & beverage and 3PLs.
With third party logistics companies needing to provide refrigerated and/or freezer space for timely
shipment of products, these companies are leasing industrial facilities with cold storage. Since 2013, the
industrial cold storage inventory has delivered 3.8 million square feet, 52 percent of which has been
leased by 3PL companies. Cold storage facilities are largely located just outside of the city in submarkets
such as Lehigh Valley, Central Pennsylvania, and Southern New Jersey for access to the population.
Source: JLL Research
Philadelphia
Chart of the week: June 27, 2016
Northern DE
$33.1B
9%
Harrisburg
$33.9B
9%
City of Philadelphia
$97.6B
26%
Profitability
PA Suburbs
$177B
47%
12. AmerisourceBergen
37. Comcast
101. DuPont
107. Rite Aid
199. Aramark
205. Lincoln National
288. Air Products & Chemicals
290. Universal Health Services
321. Crown Holdings
337. Campbell Soup
350. PPL
362. Hershey
384. UGI
457. Genesis Healthcare
484. Airgas
494. Navient
500. Burlington Stores
Southern NJ
$840M
4%
PA Suburbs
$1.92B
10%
Lehigh Valley
$1.96B
10%
Harrisburg
$2.62B
14%
City of Philadelphia
$8.79B
46%
Northern DE
$2.95B
16%
Like the rest of the regions economy, Philadelphias 17 Fortune 500 companies are highly diversified,
ranging in industries from healthcare to chemical production to consumer products. With an average
rank of 290 on the list, these firms collectively generate $372.4 billion in revenue around the region.
While the largest revenue-earning firms may be in the Pennsylvania suburbs, Comcast drives profitability
in the region, netting $8.16 billion in 2015, an 11 percent margin, partially offset by AmerisourceBergens
$130 million loss last year. While these figures may be impressive, Philadelphia overall lacks large,
corporate headquarters, which poses long term challenges to the regions growth trajectory.
Source: JLL Research, Fortune
Philadelphia
Chart of the week: July 4, 2016
Market West
Market East
15.0%
13.1%
12.9%
10.0%
5.2%
5.0%
5.0%
4.4%
3.3%
1.7%
0.7%
1.4%
0.1%
0.0%
-2.0%
-2.6%
-5.0%
Q2 2013
Q2 2014
Q2 2015
Q2 2016
For years, typical 12-month office rent growth has been negative, flat, or tepidly positive. Q2 2016
statistics reveal the strongest asking rent growth in years across the CBD overall at 9.1 percent, as well
as unprecedented double digit growth in Market East and University City. The delivery of FMC Tower,
where full service rents approach the $50 mark, is driving the surge west of the Schuylkill. On the east
side of town, the nearly complete turnover of inventory in the Independence Mall micromarket to new
ownership and the significant renovations taking place are leading asking rate increases. New product in
Midtown Village also continues to ask and receive record rental rates east of Broad Street.
Source: JLL Research
Philadelphia
Chart of the week: July 11, 2016
12.0%
10.3%
15,000,000
10.0%
7.8%
12,000,000
6.9%
9,000,000
2,647,457
3,194,397
4,109,204
5,293,625
3,000,000
2,120,911
1,460,755
6.0%
4,078,981
3,522,847
8,941,829
1,455,745
2,778,965
2,600,655
2013
Q1
2014
Q2
Q3
Q4
4.0%
2.0%
3,050,733
1,254,831
2012
8.0%
6.4%
5,326,140
6,000,000
6.4%
1,001,198
1,683,751
2015
2016
0.0%
Vacancy
Philadelphias industrial market posted nearly 8.9 million square feet of net absorption in the second
quarter, the largest quarterly absorption over the past five years. At this years midpoint, absorption is
roughly 800,000 square feet away from surpassing 2015s total. While record-breaking construction
volumes have delivered 19.6 million square feet to the market over the past year, 14.8 million square
feet of this space has already leased. Construction continues to be a driver in the market as tenant
options for quality assets in good locations are extremely limited. Although year-to-date absorption is
approaching record levels, vacancy still hovers at 6.4 percent, largely due to 4.8 million square feet of
vacant deliveries over the past 12 months. With current tenant demand at roughly 27 million square
feet, we anticipate ongoing positive absorption through the remainder of the year.
Source: JLL Research
Vacancy
Net absorption
6,265,071
Philadelphia
Chart of the week: July 18, 2016
Availability rate
30%
25%
Avg.
rent:
$23.71
20%
16%
15%
10%
Avg.
rent:
$23.51
27%
Avg.
rent:
$31.00
23%
17%
18%
Avg.
rent:
$27.84
Avg.
rent:
$24.29
Avg.
rent:
$19.81
5%
0%
Core
Secondary
Tertiary
Class A office availabilities in the Pennsylvania suburban submarkets averaged just 17 percent through
Q2, only 600 basis points higher than current total vacancy. Especially in core submarkets where rental
rates are at an all-time high, large Class A blocks are in short supply. However, large blocks of available
Class B space in the secondary suburban submarketsin particular at 1100-1140 Virginia Drive, the
Fort Washington Expo Centerhave created ample opportunity for upside through quality, Class A
renovations. With tenant demand in the suburbs currently at more than 4.4 million square feet, including
some new to market tenants, demand for competition for quality space is expected to continue and is
likely to drive ongoing redevelopment of Class B office buildings.
Source: JLL Research
Philadelphia
Chart of the week: July 25, 2016
20%
18.3%
17.3%
18.9%
Avg.
15.0%
rent:
$23.71
15%
Avg.
rent:
$23.51
15.5%
17.5%
13.9%
13.2%
Avg.
rent:
$19.81
12.9%
Avg.
rent: 9.8%
$24.29
Avg.
rent:
$27.84
Avg.
rent:
$31.00
10%
18.3%
8.1%
5%
0%
2010
2011
2012
One Floor
2013
2014
2015
2016 YTD
Midrise
While the Southern New Jersey office market typically underperforms the region as a whole, Mount
Laurel / Marlton / Moorestown (3M) has emerged as a bright spot, with Class A vacancy sitting at sub5.0 percent at the end of the second quarter and full-service rental rates exceeding $25 per square foot.
However, understanding the nuances of Class B in in a submarket where more than 56 percent of office
product exists in this space is critical. Over the past five years, midrise Class B space has consistently
outperformed its single-story counterparts, achieving sub-10.0 percent vacancy and a delta in
occupancy of 130 basis points this year. As Class A options continue to diminish, opportunity for Class B
midrise occupancy gains may emerge.
Source: JLL Research
Philadelphia
Chart of the week: August 1, 2016
875,497
Avg.
rent:
$27.84
Avg.
rent:
55,000,000
$19.81
50,001,185
Avg.
rent:
$24.29
50,000,000
100,000
225,008
200,000
595,586
300,000
605,217
400,000
742,848
500,000
Avg.
rent:
$31.00
780,626
600,000
660,290
700,000
59,097,327 60,000,000
474,358
Avg.
rent:
$23.71
889,040
58,292,828
60,836,300
Avg.
rent:
$23.51
61,092,787
585,739
900,000
800,000
65,000,000
63,415,112
1,000,000
45,000,000
40,000,000
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Leasing volumes in the CBD have not tracked with the national pattern in recent years: 2014 and 2015
data show mid-year peaks nationally and slowdowns locally. While the patterns differ, overall activity
increased in 2015 in Center City and across the country. Q1 2016 saw a precipitous drop-off in Center
City and the U.S., followed by significant divergence. With a significant rebound nationally, year-to-date
leasing activity is down approximately 8% compared to the first half of last year. In Philadelphia, an
exceptionally slow second quarter means year-to-date leasing activity is 54% off last years totals. A
looming wave of large CBD lease expirations, coupled with inbound demand from small and medium
size tenants, means volumes are likely to increase near-term pending a potential recession.
Source: JLL Research
Philadelphia
Chart of the week: August 8, 2016
1,600
$15.56
$16
$15
$13.68
$14
$13.08
$13
$12
Annual
growth 1,200
20132016
+6.3%
800
$11.63
$11
$11.36
$10.60
$10
$10.31
$11.77
Acres sold
$17
$10.78
$11.22
$10.77
+1.4%
+0.5% 400
$9.87
$9
$8
2013
2014
Acres Sold
Central PA
2015
Lehigh Valley
2016
Greater Philadelphia
The Greater Philadelphia industrial market is currently driven by development projects as vacancy rates
for Class A buildings hover around 2.3 percent. Although there is currently 13.3 million square feet of
active construction in the market and 25.2 million square feet delivered since 2015, options for industrial
development have continued to decline since 2013. The Lehigh Valley leads the market with 6.3 percent
of growth in average per-square-foot land pricing since 2013 as Class A vacancy stands at 0.8 percent
and land owners know how dynamic and appealing the Lehigh Valley is for development groups. Average
land prices are expected to increase throughout 2016 as land development options continue to decline
and Class A rents continue to grow 2.8 percent on average.
Source: JLL Research
Philadelphia
Chart of the week: August 15, 2016
+10.2%
$23.24
+3.8%
$24
$23
Annual growth
$25
$22 $21.74
$21 $20.60
$20
$19
2011
2012
2013
2014
2015
Q2
2016
Renovation of Class B office into higher quality space is a trend throughout the Pennsylvania suburbs
that has begun to drive up rents in select locations. Fort Washington in particular has seen a surge in
asking rents for Class B officean overall increase of 10.2 percent year-over-yeardue to extensive
planned renovations, including the overhauls of 1100-1140 Virginia Drive and Apex Fort Washington
(600-602 Office Center Drive). Recent upgrades are placing Fort Washingtons moderately priced office
spaces on par with the asking rents of more traditionally expensive Main Line submarkets
Malvern/Exton, King of Prussia/Wayne, and Plymouth Meeting/Blue Bell.
Source: JLL Research
Philadelphia
Chart of the week: August 22, 2016
8.0%
7.0%
6.0%
6.9%
6.3%
5.6%
5.2%
5.0%
5.2%
5.1%
4.8%
4.6%
National unemployment
rate: 5.1%
4.5%
4.2%
4.1%
4.0%
3.0%
2.0%
1.0%
0.0%
While the regional unemployment rate nearly mirrored the national unemployment rate in June 2016
(5.2 percent versus 5.1 percent), significant variances between counties still exist despite overall
employment gains. Unemployment in the City of Philadelphia is still 180 basis points higher than the
national average, but the current rate doesnt tell the whole story: Philadelphias unemployment rate
has fallen 450 basis points since 2012, even in light of labor force participation gains of nearly 8,000
residents. Rates below national levels in Northern Delaware, Bucks, Burlington, Montgomery, and
Chester Counties suggest tight labor force conditions in these areas and strong competition for
resident talent.
Source: JLL Research, U.S. Bureau of Labor Statistics
Philadelphia
Chart of the week: August 29, 2016
3,000
2,447
2,500
2,313 *
2,097
2,107 *
2,000
1,500
1,371
1,000
608
500
0
2012
2013
2014
2015
2016
2017
Multifamily development has outpaced all other asset classes by a long shot in Philadelphias CBD, with
larger and more sophisticated developers kicking off high-end rental, condo, and mixed-use projects.
2014-2015 saw a combined 4,600 units break ground. The unprecedented pace sparked talks of
oversupply and pullback, but the pipeline remains robust. 2016 is on track to exceed 2015 for
construction starts with over 2,300 units underway or imminent, including a recently announced second
tower (240 units) at East Market and a 238-unit tower at 1900 Chestnut. Excluding less certain projects,
2017 is likely to sustain the pace of 2,000+ units per year. A 2018 slowdown appears more realistic.
Source: JLL Research
Philadelphia
Chart of the week: September 5, 2016
2.5
78,380
2.24
2
70,000
1.66
1.59
50,000
1.5
1.35
40,000
36,690
National location
quotient average
1
30,000
20,000
Location quotient
60,000
Employment
61,560
58,230
0.62
0.5
10,260
10,000
0
Philadelphia MSA
Harrisburg MSA
Allentown MSA
Employment
York-Hanover MSA
Lebanon, PA
Location Quotient
Philadelphia
Chart of the week: September 12, 2016
Multifamily residential
1. Hanover Valley Forge
339 units, projected delivery Q2 2017
2. AVE King of Prussia
275 units, projected delivery Q2 2017
3. Indigo 301
363 units, projected delivery Q2 2017
4. Active Adult Community - Village at
Valley Forge
231 units, projected delivery Q2 2018
5. Brownstones - Village at Valley Forge
132 units, projected delivery Q2 2017
6. 251 DeKalb
650 units, projected delivery Q3 2016
7. 750 Moore Rd,* 248 units
8. 2901 Renaissance Blvd,* 300 units
9. 2501 Renaissance Blvd,* 250 units
10. 751 Vandenberg,* 320 units
11. Bridgeview Apartments,* 600 units
Retail
12. King of Prussia Town Center
390,000 s.f. projected delivery: Q3 2016
13. King of Prussia Mall Connector
155,000 s.f., completed August 2016
A flurry of new construction could make the King of Prussia / Wayne submarket
a new residential district, with more than 3,000 units either underway or slated
for development by year end. The submarket has been booming with activity,
with the completion of the King of Prussia Mall connector and near completion
of the KOP Town Center. For the first time in a decade, new office construction
is underway at Highway to Healths 110,000-square-foot, build-to-suit project.
Source: JLL Research, CartoDB, OpenStreetMap
Office
14. 955 First Avenue
110,500 s.f. BTS for Highway to Health
15. 1250 Morris Avenue*
60,494 s.f. building (Chesterbrook
Corporate Center)
* Planned to start by December 2016
Philadelphia
Chart of the week: September 19, 2016
2014
= Total Eds & Meds jobs
11.8%
12.1%
64,000
12.1%
12.5%
12.3%
165,000
12.0%
13.6%
12.3%
242,000
12.2%
13.7%
183,000
12.2%
15.5%
15.5%
668,000
11.6%
15.0%
12.9%
12.6%
16.0%
900,000
14.8%
18.5%
18.3%
1,618,000
18.2%
20.6%
513,000
19.8%
20.9%
2010
19.5%
20.0%
20.8%
552,000
20.4%
25.0%
10.0%
5.0%
0.0%
Philadelphia MSA Boston MSA
New York MSALos Angeles MSA Chicago MSA San Diego MSA Seattle MSA
Denver MSA
Raleigh MSA
Healthcare, education, and life sciences employment have been the consistent growth engines of the
Philadelphia region. Stacking up against other important eds, meds, and life sciences markets,
Philadelphias dominance in this sector is even clearer: as a percentage of the regional economy,
Philadelphias 20.9 percent employment share outpaces even Boston and New York, and total jobs in the
sector exceed five of these nine markets, driving new construction of lab, medical office, and traditional
office for institutions and private companies throughout the region.
Source: JLL Research, U.S. Bureau of Labor Statistics
Philadelphia
Chart of the week: September 26, 2016
Five large leases make up approximately 90% of all recorded activity in the CBD during the third quarter.
Four of the five are relocations from other CBD locations, with some contraction (Aramark, consolidating
to 279,000 square feet) and some expansion (Five Below, growing to 180,000 square feet). None of these
deals took place in a skyline-defining office tower. Rather, these tenants are heading to buildings with
large, mostly open floorplates (25,000 67,000 square feet), low-rise floors (nothing above the 9th floor),
and off-core or untested locations, from the banks of the Schuylkill to the evolving Market East. While a
dearth of high-rise large blocks is partially to blame, the moves speak to the increasing viability of
locations outside the traditional office core, changing work habits and worksite preferences, and the
importance of on-site and nearby amenities including tenant outdoor spaces, shopping, and recreation.
Source: JLL Research
Philadelphia
Chart of the week: October 3, 2016
120,000,000
66,014,178
60,652,516
63,687,970
20,000,000
57,821,588
40,000,000
79,626,023
60,000,000
61,170,068
80,000,000
128,077,156
100,000,000
109,445,795
140,000,000
2010
2016*
2010
2016*
0
2010
2016*
Central PA
2010
2016*
Lehigh Valley
Southern NJ
I-81 Corridor
Greater Philadelphias industrial logistics inventory has grown a staggering 16.7 percent in core logistics markets
over the past six years, with another 6.2 million square feet set to deliver before years end. 2015 contributed to the
largest volume of inventory growth, contributing 15.6 million square feet to industrial deliveries, 52.1 percent of which
broke ground speculatively. While only 4.4 percent of 2016s new inventory broke ground with tenants in place, 30.8
percent is currently pre-leased. Major projects to deliver since 2010 include Georgia Pacific, Procter & Gamble,
Grainger, and Unilevers built-to-suits totaling 5.8 million square feet, along with major speculative projects such as
8620 Congdon Hill Drive, Trade Center 83, and 1610 Van Buren totaling 3.5 million square feet, all of which is currently
100 percent leased.
Source: JLL Research
Philadelphia
Chart of the week: October 10, 2016
11.0%
9.4%
8.8%
4.2%
3.8%
3.5%
3.0%
2.3%
2.0%
1.1%
-0.4%
-0.8%
-1.1%
-2.8%
-3%
-2%
-1%
PA Burbs year-over-year
rent growth: 4%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Demand for quality office product without the high price tag of Radnor or Conshohocken continues to
push rental rates in well-located suburban submarkets. Plymouth Meeting / Blue Bell, which has a Class
A vacancy rate of around 3 percent but ample Class B space, saw a year-over-year rent increase of 11
percent, attributable to landlords of higher quality Class B properties growing more bullish. Also
contributing to overall rental rate increases is Fort Washington, where the average asking rent has
increased by nearly 9 percent year-over-year thanks to recent upgrades to existing stock. In general,
the rental rates have remained stagnant in Valley Forge / Norristown, but 27,000 square feet of leasing
at 1 W Main St has removed cheap space from the submarket, pushing rental rates up 9.4 percent
year-over-year.
Source: JLL Research
Philadelphia
Chart of the week: October 17, 2016
Stable
Contracting
60.0%
50.0%
50.0%
54.0%
52.4%
46.2%
43.9%
40.2%
40.0%
30.0%
20.0%
10.0%
16.4%
15.2%
5.7%
3.8%
0.0%
2014 Q3
2014 Q4
2015 Q1
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
With nearly 900,000 square feet of new and renovated office product delivering in the central business
district year-to-date, questions about ongoing tenant demand and market softening have naturally arisen.
Will the occupancy gains of this cycle come to a halt in the near future? A glimpse at the profile of current
and historic tenants in the downtown market provides some clues about future absorption trends. Over
the course of 2016, the percentage of tenants in the market looking to shrink their footprint has declined
to just 5.7 percent of total requirements, while expanding tenants in the market represent more than 40
percent of all current requirements. Barring macroeconomic instability, we expect overall CBD absorption
metrics to remain positive into the new year.
Source: JLL Research
Philadelphia
Chart of the week: October 24, 2016
25
26 units
400
350
293
20
20 units
235
10
250
217
162
15
12 units
200
12 units
13 units
112
105
8 units
8 units
150
7 units
5
0
300
Inventory
Monthly absorption
30
100
50
221
182
105
82
77
76
The Griffin
40
20
AKA
Dalian on the
University
Park
City
Recent multifamily projects show wide variations in lease-up rates and absorption as competition
increases at the high end of the market. In terms of velocity, the winners are in the heart of the CBD
(1919 Market), an untested waterfront location (One Water Street), and the booming Market East area
(The Collins), with the latter two projects on pace to lease up in under a year. There is little correlation
between time on the market and absorption: The Collins has the highest lease-up rate with only 6
months of marketing (69%), while the next fullest property, 3601 Market, is 61% leased after 18 months.
The next wave will expand tenant options in core areas (Market East, Rittenhouse, Old City) and offer
high-end product in less mature locations (North Broad, Powelton Village). Subtle differences in
amenities, unit size, pricing, and locations will make all the difference for developers and tenants alike.
Source: JLL Research, Philadelphia Business Journal, Delta Associates
Philadelphia
Chart of the week: October 31, 2016
91.0
90
8,000
86.2
6,700
80
7,000
74.1
6,000
70
60
52.6
50
5,000
50.3
47.5
4,000
41.3
40
33.0
30
20
2,000
1,932
1,540
3,000
1,530
10
507
839
660
601
1,000
Retail
Consumer Goods
Pet Supply
Industrial Supply
Manufacturing
E-commerce
3PL
The warehouse and distribution sector has created more than 14,300 jobs across the Greater Philadelphia
market since 2015, 50 percent of which have been in the Lehigh Valley. As the industry evolves to meet new
tenant demands, understanding tenant employee densities by industry will be key in development decisions. Ecommerce and 3PL leasing activity has significantly increased, accounting for roughly 35 percent of the total
square footage leased since 2015. As these industries account for the highest concentration of jobs per
100,000 square feet leased, savvy landlords will need to adjust adjust their development plans to attract these
tenants with respect to car parking, employee amenities, sewage levels, and other factors.
Source: JLL Research
Philadelphia
Chart of the week: November 7, 2016
$206,594
$225,364
$241,787
6%
$236,456
$263,099
$260,358
$251,945
$248,478
$378,829
$400,000
8%
$439,996
$600,000
$544,470
$633,257
$1,122,518
$800,000
$1,314,883
$1,000,000
10%
4%
$200,000
2%
$0
0%
Projected Growth
$1,200,000
12%
$1,374,457
$1,400,000
The Philadelphia region continues to outcompete the largest U.S. markets for the title of most affordable
metro, as measured by an index that considers median home price as a function of median income in the
market. While Philadelphias median home prices hover close to the national average, the regions below
average growth predictions, combined with major increases in the cost of housing in major Texas markets,
will reinforce Philadelphias position as a leader in affordability among the major U.S. cities in the coming
years. Interestingly, the low cost of housing in the market has not slowed down new home construction:
estimates suggest a 52 percent year-over-year increase in single-family home starts in 2017.
Source: JLL Research, ULI
Philadelphia
Chart of the week: November 14, 2016
Suburbs
14,000
12,052
Local Employees
12,000
9,682
10,000
8,000
6,541
+21%
6,000
+43%
4,000
8,782
6,144
2,000
-
10,656
+55%
+127%
397
900
1,396
2013
2014
2015
In 2015, the Philadelphia regions 50 largest companies (as identified by the Philadelphia Business
Journal) produced a total of $2 billion in revenue and supported more than 12,000 jobs, up from $1.28
billion and 6,500 jobs in 2013. While only 10 firms, 1,400 jobs, and $72.75 million were located or earned
in the city, city-based firms outperformed their suburban peers on job creation and revenue growth 2013
to 2015. While the suburbs clearly outshine the city in magnitude, job creation and revenue growth rates
in the city of Philadelphia suggest that there may be competitive advantages to locating in the city for
some firms.
Source: JLL Research, Philadelphia Business Journal
Philadelphia
Chart of the week: November 28, 2016
25,473,300
20,659,000
13,486,216
12,655,777
12,562,037
2016 Q2
2016 Q3
2016 Q4
13,638,182
15,457,178
7,259,062
2015 Q1
17,210,800
15,442,000
10,669,765
6,910,702
5,000,000
2,806,924
10,000,000
1,590,148
15,000,000
2014 Q4
16,623,000
17,430,726
20,000,000
1,139,988
Square Feet
25,000,000
2016 Q1
2015 Q4
2015 Q3
2015 Q2
2014 Q3
2014 Q2
2014 Q1
Construction in the Greater Philadelphia industrial market has undergone a shift over the past three years. Where
speculative construction accounted for 20.2 percent of total active construction in the beginning of 2014, today
accounts for 66.5 percent and more then 12.5 million square feet. Despite this increase, speculative construction is
still unlikely to meet the demands of new tenants in the market, which have surged to their highest level on record at
26.0 million square feet, or 0.48 square feet of new construction for every square foot of new tenant demand. On the
submarket level, the Lehigh Valley leads the market overall with 17.1 million square feet (65 percent) of all new tenant
requirements looking at the submarket (in addition to others) but only 4.2 million square feet of the entire markets
speculative construction. Nineteen percent of the Lehigh Valleys speculative construction is pre-leased at this time.
Source: JLL Research
Philadelphia
Chart of the week: December 5, 2016
Multifamily
Office
Retail
Total PA Suburban
Construction Pipeline:
6.4 m.s.f.
Hospitality
2,221,343
Core
1,040,725
693,425
500,000
610,275
1,425,300
1,000,000
1,425,300
1,350,000
1,100,000
1,500,000
1,984,700
1,813,656
2,000,000
800,000
2,500,000
1,132,343
494,600
349,204
Secondary
255,528
123,678
123,040
Tertiary
Multifamily projects dominate the suburban Philadelphia construction pipeline, with under construction or
proposed development (projects that have a projected breaking ground date in the coming year) totaling
5.9 million square feet. Driving the multifamily boom are the 1,000+ units underway by various
developers at the Village at Valley Forge in King of Prussia / Wayne and the 326 unit Haven at Atwater
development in Malvern / Exton, slated to wrap up by end of 2016. Another project demonstrating the
new dynamics of suburban commercial real estate is the 1.6 million square foot, mixed use Uptown
Worthington. The site will include 750 apartment units, 185,000 square feet of new office space, and a
massive lifestyle retailing center, which has been planned as a walkable, urban community in the heart of
suburban Malvern / Exton.
Source: JLL Research