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PHILADELPHIA CBD Home, Sweet Center City
Leasing activity is off to a slow, but steady, start in 2005. Vacancy inched up an additional percentage point to 13.3% since the end of fourth quarter; however, the leasing market remains active, most likely due to the enticing concessions still offered by landlords. With interest rates remaining low, the market still remains attractive to investors. First quarter closed some significant sales including 4 Penn Center for $95 million and 833 Chestnut Street for $59 million.
Sky-High Excitement
There is finally some excitement on the Center City real estate skyline. At least two, and possibly four, new towers are being developed. The Keystone Opportunity Investment Zone (KOIZ) fueled the success of the Cira Centre, which will be over 90% leased before the first tenant takes occupancy in November. Can a second tower (Cira 2) be far behind? The 1,200,000 SF Comcast Center is finally a reality with Comcast initially signing in for just over 500,000 SF – hopefully that number will grow dramatically before its opening in late 2007. Viacom is in negotiations to move their studios and offices from Independence Hall to a new location downtown at 15th and Arch Streets:Four new buildings – that is more than Center City has seen in over a decade.
This will highly impact the CBD market, not counting the Cira 2, or 15th & Arch Street, there is over 3,000,000 SF of availability being added to our 38,000,000 SF market. That additional 8% to the current 13.3% vacancy will total a 21.3% vacancy figure for Center City.
The most evident development activity is the “Condo Boom”that is prevalent throughout the city. The combination of strong demographic trends, very low interest rates, and a 10-year tax abatement for both residential conversion and new construction continues to stimulate supply. According to data collected by the Center City District, more than 1,500 new residential units have been approved for 2005 and another 4,500 are in the pipeline.
Waterfront
Center City’s skyline activity has taken the spotlight away from the flurry of activity along the Delaware River waterfront. Developers are beginning to focus on the potential of Philadelphia’s waterfront property. The Philadelphia Navy Yard is the most notable of these projects, with a 1,200 acre mixed-use community planned for development. The master plan includes a 70 acre Corporate Center that will add 1.4 million square feet to the Philadelphia office market. Other significant projects include Brandywine Realty Trust’s extensive development on piers 12 – 24 that focuses on retail and residential.
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