The U.S. commercial real estate market for office space, including Philly office space and Philly retail space – a new study shows – is at a tipping, or turning, point that could presage a slowdown in demand for national and Philadelphia commercial real estate listings.
The study from CoStar Director of Office Research Walter Page indicates the U.S. and Philadelphia commercial real estate market had solid fundamentals during the first quarter, including very strong net absorption.
The report on national and Philadelphia commercial properties was made available through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
“We are seeing mixed signals in the marketplace, although our expectation is the office market will continue to do fairly well for the next few years,” Page said. “The biggest mixed signals are really related to net absorption and sales volumes.”
Total net absorption of 11 million square feet of office space in the first quarter throughout the U.S. commercial real estate market – including Philly office space and Philly retail space – was about the same as first-quarter 2015, a leveling off from the upward trend of recent quarters. On the other hand, Page said, net space of national and Philadelphia commercial properties taken by occupiers over the past four quarters exceeds the similar trailing period ending in 2015’s first quarter by nearly 11 percent at 98 million square feet.
“All in all, it’s still a very good picture, but the market is clearly not growing as rapidly as before,” he said in regard to the overall commercial real estate market. “Our expectation is that going forward, we’re going to see a continuing decline in net absorption, principally because we’re headed for that demographic cliff of retiring baby boomers.”
Despite signs of slowing, solid absorption and occupancy levels in U.S. and Philadelphia commercial real estate listings continue to be enabled by the moderate pace of new office construction and deliveries in most markets. The 127 million square feet of office space under construction in the first quarter was up only slightly from the same period last year.
Early 2016 results for investment sales, coming off a record year for sales volume last year, are also sending mixed signals. The preliminary total of $30 billion in first-quarter 2016 office sales volume is down about 10% from a year ago. That said, the four-quarter trailing total of $151 billion ending last month exceeded the previous four-quarter period that ended a year ago.
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