M id A tlantic Real Estate Journal — Pennsylvania — May 15 - 28, 2020 — 17B


P ennsylvania

Newmark Knight Frank 1Q20 Office Market Report Regional markets on strong footing before disruption from COVID-19


70 basis points year-over-year to 14.7 percent, the highest measure recorded for the suburban market since year- end 2017. Among the larg - est retractions were Teva’s vacancy of the 120,290 s/f building at 425 Privet Lane in Horsham, Hibu/Yellow Book’s 60,000 s/f downsizing at 2201 Renaissance Blvd. in King of Prussia, and SEI and Main Line Health’s vacancy of a combined 90,000 s/f at 52 East Swedesford Rd. in Mal - vern. 52 East Swedesford Rd. also traded hands in the first quarter; Brandywine Re-

occupying a combined 92,443 s/f of the space formerly oc - cupied by American Water at 101 Woodcrest Dr. Overall rents continued to push up - ward to $20.85/s/f, the high - est rents achieved since the second quarter of 2018. While demand for office space was healthy before the effects of the global pandemic began to be felt, not just in Southern New Jersey but market-wide, overall asking rents have like - ly peaked and are expected to gradually decrease in the upcoming quarters. continued on page 18B

future. “When capital mar - kets activity resumes in full, single-tenant, net-lease office buildings in our region are likely to attract even stronger investor interest due to the stability of the asset type,” he said. Margolis also noted that he expects to see increases in sale-leasebacks in the future as owner-occupiers look for ways to generate cash flow. The Southern New Jersey office market registered posi - tive net absorption totaling 51,859 s/f in the first quarter, driven primarily by Camden County and Jefferson Health

alty Trust sold the property for $18 million or $137/s/f to Tripoint Properties . This was one of the only notable capital markets sales to close in the suburban region in the first three months of the year; overall sales volume was nearly half the amount tallied in the fourth quarter of 2019. According to Mike Margo- lis , NKF senior managing director, the current economic situation will inevitably ex - acerbate the slowdown of local transaction volume, but there may be some real av - enues for opportunity in the

HILADELPHIA, PA — Newmark Knight Frank (NKF) has re-

l e a s e d i t s first quarter 2020 of f i ce reports for the Philadel - ph i a CBD, s u b u r b s , S o u t h e r n New Jersey andNorthern

Matt Guerrieri

Delaware. The global CO - VID-19 pandemic did not begin to cause significant economic disruption in the region until mid-March; therefore, first quarter statistics will not be fully reflective of the current moment in the commercial real estate sector. Yet, first quarter activity reinforced a market- wide position of strength, on which the region will stand to weather the stall in business. Philadelphia’s Central Busi - ness District (CBD) continued its strong late-cycle perfor- mance with 137,000 s/f of positive absorption tallied in the first quarter, trimming vacancy down to 12.4 percent. Maintaining a prevalent trend over the past few years, the CBD welcomed over 100,000 s/f of new-to-market compa - nies, including Mindspace, a coworking operator which signed for 42,000 s/f at The Wanamaker. NKF managing director Matt Guerrieri said, “When the economy re-opens, firms in expensive gateway markets may look closer at Philadelphia as a talent-rich, affordable office market option for operational diversification or relocation.” A new office development, One Ucity Square, officially broke ground in January, with preleasing commitments from two life sciences firms (Century Therapeutics and Integral Molecular). Life sci - ences and healthcare compa- nies are ever more essential in this moment of pandemic- induced economic crisis, and the CBD’s concentration of firms in these sectors, both in terms of employment and of- fice occupancy, may mitigate disruptive effects to the office market. In the suburban Philadel - phia office market, 395,000 s/f of negative absorption ac - cumulated in the first quarter due to multiple significant retractions and limited new occupancies of space. This activity pushed vacancy up

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