Second Quarter 2014

Issue Thirty-Four

2Q 2014 Recap

Quick Links

• Overview

• Roles & Responsibilities

• Tenant Representation

• Corporate Account Management

• Relevant Experience

• Publications

Contact:

Scott M. Miller
+1 610 251 5187
scott.miller@cbre.com
Licensed: PA

Joseph S. Conwell

+1 610 251 5101

joseph.conwell@cbre.com
Licensed: PA

James P. Kelley
+1 610 251 5156
james.kelley@cbre.com
Licensed: PA

Rija R. Beares
+1 610 251 5153
valerija.beares@cbre.com
Licensed: PA

CBRE, Inc.
1200 Liberty Ridge Drive
Suite 320
Wayne, PA 19087

Licensed Real Estate Broker 

RE: Philadelphia Suburban Office Market - Second Quarter 2014

The Philadelphia MSA continues to see improvements to key fundamentals in the 2nd quarter: 

• unemployment has dropped to 5.6% from 7.6% one year ago; and 
• average rents have risen for four consecutive quarters, reaching $24.14 full service gross per sq. ft.

As consumer confidence continues to improve, businesses are evaluating their operational inefficiencies and making the decision to restructure or relocate their offices. Two main drivers are causing operational inefficiencies: technology and hangover from the downturn. Technology has fundamentally changed the way all industry types operate by reducing the need for storage and enabling a mobile labor force. Both factors lead to a reduced square footage allocation per employee. Technological advances have resulted in an interesting perspective shift with regard to the evaluation of real estate, specifically density. 

Take the example below where a tenant producing widgets (hello, economics 101) is evaluating a new location for 200 employees.

{Click image to enlarge}

While Building “C” is the most expensive on a per square foot basis, it is the most economical alternative due to the efficiency of the building (helped in large part due to the elevated parking ratio).  Over the course of a seven (7) year lease term, Building C saved the tenant $1.75 MM in rent, or, $8,750.00/employee.  The tenant will also enjoy the benefits of increased employee productivity (on site fitness center, café, and conference center) as well as access to public transit (easing their recruitment of Millenials out of the CBD).
 

Our team would like to thank the following clients for their support in the second quarter of 2014:

• CBRE Econometric Advisors Market Report • Second Quarter 2014 Market Index Brief