Your Next Office Job in the 'Burbs

The Philadelphia region is closing in on a record for the longest stretch of job growth in the last half century.

Figure 1 shows the longest expansions in the metro's employment base since 1970, including our current one of 31 consecutive quarters of annual growth. Surpassing the 1990's boom - or at least tying - certainly looks attainable with a favorable near-term economic outlook.

Figure 1: Job Growth Expansions
Consecutive quarters of year-over-year job growth since 1970

(Source: U.S. B.L.S., CBRE Research)

But the geography of the economic expansion is changing.

The Philadelphia metropolitan division (comprising Philadelphia and Delaware counties) had been the dominant, office-using job generator since the Great Recession, but over the past two years, has decelerated somewhat rapidly.

In the suburbs, however, office-using employment growth (professional and business services, financial activities, information) has remained more resilient, usurping the urban core as the region's office job engine.
In fact, forecasts call for over two-thirds of all new office jobs in the region to be created in the suburbs by the end of 2020.

Figure 2: The Suburbs Shine
Average annual rates of office-using employment growth

(Source: U.S. B.L.S., Moody's Analytics; Note: "Philadelphia"=Philadelphia Metro Division including Delaware County, "PA Suburbs"= Montgomery-Bucks-Chester counties Metro Division)

This city-suburban role reversal in terms of where the office jobs are being created isn't unique to Philadelphia.

The same phenomenon is occurring in almost every major metropolitan area where the metropolitan division containing the primary city is decelerating and its outlying, suburban metropolitan divisions are either accelerating, or now exceeding, the urban core in terms of office-using employment growth.

A recent Brookings report shows a similar trend regarding population growth, in which the rate of growth in most U.S. cities has reversed course and is now declining while the suburbs are growing faster.

Some of the "push" of the expansion into outlying areas is caused by urban labor constraints, higher prices and costs, and a continually improving single-family housing market.

Regardless the specific reason, the push into the suburbs is on. As a result, CBRE Research is forecasting lower office vacancy rates in Suburban Philadelphia through the end of 2018. The amount of vacant office space available for tenants at the end of the year should be the lowest it's been since the early 2000s.

Figure 3: Record-low vacancy
Suburban Philadelphia Office Vacancy

(Source: CBRE Research)

Contact:
Ian Anderson
Director of Research and Analysis
T + 1 215 561 8997
ian.anderson2@cbre.com