The complete absence of new office development over the past two quarters highlights that elevated vacancy in Philadelphia is being driven by soft demand and tenant downsizing rather than excess supply. This marks a sharp contrast to prior cycles, when new deliveries peaked at over 1.5 million square feet in Q1 2019.
With development activity well below the 10-year average of 833 KSF, new construction has shifted toward an anchor driven model, as seen with Chubb’s headquarters, where major tenant commitments are required to support new development.
The lack of new development will also limit the introduction of modern space needed to attract tenants, likely driving increased renovations and upgrades as existing buildings compete with newer trophy and Class A properties.
