Brokers forecasting Phila.'s commercial real estate market

Philadelphia Business Journal - by Natalie Kostelni

Date: Thursday, January 20, 2011, 12:28pm EST . ..

Natalie Kostelni

Reporter

Email: nkostelni@bizjournals.com

 

Last year ended better than expected and this year should be an even better year. That was the main takeaway from Grubb & Ellis’ annual forecast held this morning at the Union League of Philadelphia.

 

“We think it will be a turn-the-corner year for the city,” said Wayne Fisher, an office broker at Grubb & Ellis.

 

The Central Business District ended 2010 with a 14.2 percent vacancy rate on 39.8 million square feet of office space. That’s up 1 percentage point over 2009. The market also had 362,000 square feet of negative absorption but that was less than the 500,000 square feet that was expected. Six firms contributed most of the vacancy after they decided to make major contractions last year, shedding a tad more than 1 million square feet. The tenants were: Verizon, Sunoco, Wolf Block, Dow, Arkema and Unisys.

 

Other highlights:

 

• South Broad, which used to be one of the city’s tightest submarkets, now has a vacancy rate of 15 percent, led by tenants fleeing to better buildings that can now offer cheaper rents. One of the office properties hardest hit has been 260 S. Broad St., which saw three tenants depart and the building put into receivership;

 

• University City is the tightest submarket at 7.2 percent vacancy;

 

• United Health continues to vacate its space at Wanamaker, hurting East Market; and

 

• Investment activity was light last year though Brandywine Realty Trust (NYSE:BDN) rang in two big deals — its acquisition of Three Logan (nee Bell Atlantic) and its 25 percent stake in One and Two Commerce Square.

 

The big prediction for this year made at the forecast: New downtown office construction.

 

Next up: The CREW forecast this afternoon where M. Walter D’Alessio of Northmarq, Esther Pulver of Oliver Tyrone Pulver, Larry Steinburg of Michael A. Salove and Anne Klein of Grubb & Ellis will make their predictions for this year.