It’s been over three years since the pandemic initially impacted the country, and a permanent shift towards a new way of working has occurred. According to the senior vice president at CBRE’s Philadelphia Office, Nick Gersbach, the downtown market has been heavily impacted by this shift, and the speed at which it’s contracting is unprecedented.
The commercial real estate industry is now grappling with the implications of this change. Gersbach anticipates that the market will take three to five years to stabilize and begin experiencing a gradual recovery.
While Nick Gersbach’s work specifically pertains to Center City, his observed trends appear to be mirrored in the Pennsylvania suburbs and South Jersey. CBRE’s analysis of the first quarter of 2023 reveals that office occupancy across the greater Philadelphia region has decreased by over 9.7 million square feet since the onset of COVID, equivalent to almost eight Comcast Centers.
As defined by CBRE, the Philadelphia metropolitan area encompasses the city, its collar counties, northern Delaware and South Jersey, and Harrisburg and the Lehigh Valley.
Despite the positive signs of recovery that emerged following the rollout of COVID vaccines, occupancy losses in the past three quarters have unfortunately reversed these trends. As a result, many office tenants who have not yet reached the end of their contracts are now attempting to sublease large amounts of space in an already flooded market.
In fact, the available space for lease in the region has reached an all-time high, exceeding the previous record set during the Great Recession. This data comes from a first-quarter report by the CoStar Group, a commercial real estate tracking firm based in Washington, D.C.
“People are not going back into offices. A report from the CoStar’s Brenda Nguyen says such trends may indicate “that work patterns are reaching a new equilibrium in Philadelphia.” Nick Gersbach.