Leasing Activity
CBD
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Overall vacancies declined to 3.9 million s.f., resulting in a 3.2 percentage point drop from one-year ago to 8.9 percent.
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Year-over-year, Class A direct asking rents increased 4.1 percent to $24.89. The overall direct asking rent for the CBD increased 2.5 percent from one year ago to $23.56. At $25.00, the Market Street West submarket had the highest overall direct asking rent for the Philadelphia CBD.
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For 2007, law firms, finance and healthcare were the prominent industries leasing in the CBD.
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To recap the notable leases signed this year:
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Comcast Corporation leased 151,645 s.f. at 1701 John F. Kennedy Boulevard.
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The University of Pennsylvania Health System leased 147,716 s.f. at Centre Square-West Tower.
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AIG leased 123,485 s.f. at One Liberty Place for a 16-year term.
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Morgan, Lewis & Bockius leased 78,915 s.f. at Ten Penn Center.
Suburban Philadelphia
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Despite a relatively flat absorption rate for the fourth quarter, the year-to-date overall vacancy rate slipped to 13.44 percent with the direct vacancy rate declining to12.39 percent.
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Industries prominent in leasing activity for the Suburban market include healthcare, financial services and insurance.
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In response to a number of new office buildings being delivered or slated for completion by the end of 2007, landlords have decreased rents. The overall direct asking rent for the Suburban market declined 8.8 percent from fourth quarter 2006 to $21.98.
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Notable leases of the year include:
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Catholic Health East’s move out of 14 Campus Boulevard, Newton Square and into 101,273 s.f. at 3805 West Chester Pike, Newton Square.
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United Health Group leased 90,968 s.f. at 601 Office Center Drive, Fort Washington.
Wilmington/New Castle
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Compared to this time last year, the overall vacancy rate ticked up by 2.87 percentage points to 17.60 percent. A large block of sublease space (201,000 s.f.) remains available at 1801 Augustine Cutoff in Wilmington.
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Rents continue to flatten. Year-over-year, overall direct rental rates declined 9 percent, ending 2007 at $21.84.
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Year-to-date overall absorption was negative 102,531 s.f. despite Barclay’s Bank lease of 257,000 s.f. at 125 S West Street in Wilmington.
Building Sales
Building Sales of note:
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The sale of 1500 Spring Garden (1.1 million s.f., Class B) to Jacob Weinreb for $210 million ($191/s.f.) was the largest sale for the City of Philadelphia in 2007, even though it is not located in the CBD.
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Suburban Philadelphia’s most notable transaction was Brandywine’s sale of its 29-property portfolio (1.6 million s.f.) to DRA Advisors for $245.4 million ($153/s.f.). The properties are situated in Allentown, Horsham, Fort Washington and Bensalem.
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The largest sale within the CBD was the sale of the Wanamaker building (1.4 million s.f., Class A) for just over $200 million to Behringer Harvard ($143/s.f.).
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The largest transaction of the year for the Wilmington CBD was the $43 million sale of 222 Delaware Avenue (261,070 s.f.) to Kaiserman Company, or $165/s.f.
Construction Activity
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