Office tenants in Philadelphia’s central business district have long been clamoring for the neighborhood’s limited supply of new trophy space, but in recent years, not much of that demand has trickled down to its older Class-A stock.

While restrictive debt obligations still prevent many of the neighborhood’s Class-A landlords from transacting, these buildings have increasingly been acquired by better-capitalized owners that are more prepared to welcome new tenants. That is part of why CBRE predicted that the submarket’s vacancy rate will peak this year in its midyear greater Philadelphia forecast.

The CBD had a total vacancy rate of 23.1% as of last quarter, CBRE found. CBRE Greater Philadelphia Market Leader Mamadou Baldé said the brokerage is seeing a sustained flight-to-quality trend amid a flatlining regionwide office construction pipeline.

“We'll see that bounce down into Class-A until that fills up out of necessity,” Baldé told Bisnow.

CBRE's forecast found that while the trend is well underway in the Philly suburbs, it has been muted in Center City due to the debt profile of the neighborhood’s Class-A buildings, which are generally older, less amenitized and less centrally located than their trophy counterparts.

The loans underpinning a flurry of purchases made in the CBD when interest rates were low are now maturing as the industry contends with significantly higher borrowing costs, CBRE Executive Vice President Doug Rodio said.

“Center City is at a point in time where those Class-A-plus buildings, many of which I sold, are facing troubled capital stacks and are unable to structure lease transactions,” he said.

“A lot of these landlords did a great job in executing their business plan and renovating their assets and pushing rental rates but now come to the end of their loan period in a different capital markets environment, where the 10-year Treasury is as high as it's been in the last three years,” Rodio added.

As those debt-saddled owners contend with this distress, their lack of access to capital means they have few options to improve their situation.

“You are seeing issues where, unfortunately, people can't perform, can't do deals, don't have money for [tenant improvements],” Baldé said.

The forecast predicted that Center City’s Class-A landlords won’t be able to boost asking rents until late this year or early next, but it also forecast a broader shift in the market as some of those assets return to the market under new ownership.

Leasing velocity is strong at 2000 Market St., which Rodio highlighted as an early example of this trend.

CSB Holdings and Tide Realty Capital bought the building from Nahla Capital for $45.5M in August 2025 and have expanded occupancy from 67% to 75% with 65K SF worth of net new leases. 

The transaction last year was the first post-pandemic sale of a Center City office building greater than 500K SF that wasn’t converted into another use, Rodio said.

CSB and Tide borrowed $50M from Citadel Credit Union to continue the lease-up, which was the largest loan in the Chester County bank’s history, according to an announcement earlier this week.

Rodio also highlighted the 2024 sale of 1760 Market St. An entity associated with Giller Realty bought the 15-story property for $11.5M, roughly one-third of the $31.5M it traded for in 2018.

“They, just like 2000 Market St., are going to continue to operate that as office and have signed a flurry of leases because they're offering high-quality space at an attractive rental rate in a great location,” Rodio said.