VACANCY RISES ACROSS THE CITY AND SUBURBS

Vacancy increased in Southern New Jersey, Suburban Pennsylvania, and the City of Philadelphia, with only two of the nine submarkets experiencing a decrease. Rents increased metro-wide from a year ago, but below the long-term average. The pipeline of likely deliveries over the next 36 months in the city remained elevated, but declined from the second quarter of 2017 as some projects have been delayed. Increased construction may restrain rent growth and continue to push up vacancy rates in the near-term.

SECOND QUARTER 2018 HIGHLIGHTS

The metro area Class A stabilized vacancy rate increased by 80 basis points from a year ago to 3.3% at second quarter 2018. Montgomery County and North Philadelphia were the only submarkets to experience a decline in vacancy, while West Philadelphia’s vacancy rate remained unchanged.

• Stabilized vacancy in Southern New Jersey rose 130 basis points from 1.1% last year at this time to 2.4%.

• Suburban Pennsylvania stabilized vacancy increased by 10 basis points from June 2017 to 2.7%.

• Stabilized vacancy increased by 170 basis points in the City of Philadelphia from 2.9% one year ago to 4.6%.

Rent increases over the year varied across the metro area. Here are the effective rent changes by sub-area for the 12-month period ending June 2018:

Southern New Jersey up 1.2%.

Suburban Pennsylvania up 4.3%.

City of Philadelphia down 3.2%.

Metro-wide, effective rents rose 1.2% in in the 12-month period ending June 2018. Average metro-wide effective rents at second quarter 2018 are $1,892, or $2.01 per SF. Effective rents average $2,234 ($2.54 per SF) for high-rise product in the City of Philadelphia and $1,703 ($1.72 per SF) for low-rise product in the suburbs.

Delta Associates, the research affiliate of Transwestern, is a firm of experienced professionals which has been providing consulting and subscription data services to the commercial real estate industry for over 35years.

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