Philadelphia Commercial Real Estate Report 2023: Biggest Property Deals

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Philadelphia, Pennsylvania’s commercial real estate market is constantly evolving and changing, reflecting the economic and social trends of each city and region. Every year, there are new and exciting developments, transactions, and opportunities in the commercial real estate sector, as well as challenges and risks.

How We Identified the Top Commercial Property Sales in Philadelphia

We used a multitude of data sources, including public records, news articles, and industry reports, to identify some of the top commercial property sales in Philadelphia, as well as the office vacancy rates and trends in the market. Our team analyzed this data to provide a comprehensive overview of the commercial real estate landscape in Philadelphia. Whether you are looking to buy, sell, lease, or invest in commercial real estate in Philadelphia, this post will provide you with valuable insights and information to help you make informed decisions.

A major factor impacting the commercial real estate market in Philadelphia and other cities are rising interest rates and economic uncertainty. Higher interest rates increase the cost of borrowing and financing for commercial real estate transactions, as well as reduce demand and affordability for buyers and investors. Economic uncertainty can also create volatility and risk in the market, as businesses and consumers may postpone or cancel their plans to lease, buy, or sell commercial properties. Commercial real estate stakeholders closely monitor interest rate and economic trends and adjust their strategies accordingly.

Here are a few of the most significant property deals of the year so far Philadelphia:

  • The sale of The Curtis Center, a historic office building with 885,000 square feet of space, for $125 million to a joint venture of Nightingale Properties and Wafra Capital Partners.
  • The sale of The Bourse, a mixed-use building with 250,000 square feet of office space and a food hall, for $92 million to MRP Realty and ASB Real Estate Investments.
  • The sale of The Philadelphia Marriott Old City, a 364-room hotel with 24,000 square feet of meeting space, for $80 million to Highgate Hotels.
  • The sale of The Sterling Apartment Homes, a 537-unit high-rise apartment complex with 28,000 square feet of retail space, for $65.5 million to Aimco Apartment Homes.
  • The sale of The Philadelphia Building, a 10-story office building with 200,000 square feet of space, for $41.25 million to SSH Real Estate and Young Capital.

The Latest on Philadelphia Office Vacancy Rates

One of the indicators that reflects the impact of interest rates and economic uncertainty on the commercial real estate market is the office vacancy rate. The office vacancy rate measures the percentage of office space that is unoccupied or available for lease or sale in a given market or submarket. A high office vacancy rate can signal a weak demand or oversupply of office space, while a low office vacancy rate can signal a strong demand or undersupply of office space.

Another factor that is currently impacting office vacancy rates and the commercial real estate market across the nation is the continuing impact of work-from-home. The COVID-19 pandemic has accelerated the adoption of remote and hybrid work models, which allow employees to work from home or other locations instead of commuting to a central office. This has reduced the need and demand for office space, as well as changed the preferences and expectations of tenants and landlords. Some of the trends that have emerged from the work-from-home phenomenon are the increased demand for flexible workspaces, suburban offices, and amenities that support health and wellness.

Using data from various sources such as Cushman Wakefield and Commercial Edge here are the office vacancy rates year over for Philadelphia starting in 2021:

  • In 2021, the office vacancy rate in Philadelphia was 10.08%, slightly lower than the national average of 10.9%, as the city’s office market was resilient to the impact of the pandemic and the shift to remote work.
  • In 2022, the office vacancy rate in Philadelphia rose to 18.3% by the end of March, higher than the national average of 16.7%, as the recovery of the office market was hampered by space givebacks and a weak capital markets environment.
  • In 2023, the office vacancy rate in Philadelphia increased further to 20.6% by the end of June, reaching an all-time high for the market, as the demand and occupancy of office space remained low despite the vaccination rollout and the reopening of the economy.

Here’s a closer look at office space trends and vacancy rates in Philadelphia’s submarkets:

Submarket 2021 2022 2023
CBD 9.8 19.9 20.6
North Philadelphia 7.5 7.9 8.1
South Philadelphia 10.6 11.4 11.7
West Philadelphia 10.2 10.8 11.1
Bucks County 16.5 18.4 19.2
Chester County 19.3 22.1 23.4
Delaware County 18.7 20.2 21.3
Montgomery County 19.8 21.5 22.7

Looking Ahead: Philadelphia Commercial Real Estate Outlook

The commercial real estate market in Philadelphia has experienced some notable property sales and transactions in 2023, as well as some challenges and opportunities in terms of office vacancy rates and trends. Looking ahead, the outlook for 2023 and beyond is cautiously optimistic as the market faces some uncertainties and risks, such as the potential oversupply of office space, the changing demand for flexible workspaces, and the competition from other cities and regions.