University City and the Navy Yard led the way for greater Philadelphia's office sector last quarter as absorption turned negative in the urban core and the suburbs.
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Burlington’s deal to move its headquarters from South Jersey to a 441K SF space at 3151 Market St. in University City and Hanwha’s 64,400 SF lease near its growing shipbuilding operation in the Navy Yard helped bolster those areas last quarter.
Still, the overall central business district — which includes University City and the Navy Yard — had move-outs outpace move-ins by 63,100 SF, according to JLL.
Much of that was due to Day & Zimmerman’s move from 97K SF at 1500 Spring Garden St. to 48K SF at 11 Penn Center, JLL Philadelphia Research Manager Emily Friedman said.
“It’s a quarter that is more than the high-level data points," Friedman said. "If you just take it at face value, it may look like it wasn’t as strong of a quarter. That’s ignoring all the things that happened under the surface … I have a lot of confidence for the end of the year.”
The CBD's year-to-date absorption remained positive at 448,500 SF, according to JLL, but that was heavily buoyed by Chubb’s move into its 438K SF build-to-suit headquarters at 2000 Arch St.
University City benefited from Monell Chemical Senses Center’s relocation to 64K SF at One uCity and Nasdaq’s renewal of its 75K SF lease at FMC Tower.
Office availability in the University City submarket fell from 22.3% in the second quarter to 19.5% in the third quarter, according to Savills' reports. Meanwhile, the availability rate ticked up in East Market and West Market to 21.3% and 24.3%, respectively.
The Burlington deal, in which the company acquired the building at 3151 Market St. for $240M, also provided a positive signal for the broader market, Savills Philadelphia Research Manager Daniela Stundel said.
“It’s a company who’s not eds or meds or a law firm, so it’s more diversification,” she said.
“The publicity for us from this will hopefully have people look at us as a place to relocate to as a place that’s a little more affordable than New York or Washington, D.C.,” she added.
The sale came after the property, which was completed in 2025 as a lab space, sat vacant for more than a year.
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Despite the Hanwha deal, office vacancy in the Navy Yard ticked up 1.5 percentage points quarter-over-quarter to 20.7%, according to Savills.
The complex can be a good fit for tenants who need easy access to the industrial sections of Philly or the city’s airport, but Stundel said it is less convenient than Center City.
“I’m not expecting tomorrow to be a huge turnaround where everyone and their mother wants to go to the Navy Yard,” she said.
In the Philly suburbs, move-outs outpaced move-ins by 187K SF in Q3, JLL reported. Year-to-date absorption remains positive at 62,700 SF.
The biggest deal in the entire region last quarter was Vanguard’s sale-leaseback of a 322,700 SF space at 1041 W. Valley Road in Wayne, according to the Savills report.
Berkshire Hathaway Fox & Roach’s upcoming expansion into a 40K SF space at 1436 Lancaster Ave. in Berwyn and KenCrest’s move to 26K SF at 401 Plymouth Road in Plymouth Meeting also made the top 10.
Residential conversions in the suburbs were front of mind for Stundel, who said demolitions for new construction generally make more sense there than repurposing obsolete buildings.
Sal Paone Builder is tearing down most of the Plymouth Ridge Corporate Center to build 159 townhomes in Plymouth Meeting, while TriPoint Properties works to convert 52 Swedesford Road in Malvern into a mixed-use concept with 250 apartments.
A challenging entitlement climate has historically hamstrung these projects, but that might be changing as the suburbs face a major housing shortage.
“That is something I think we’re going to see more of in the suburbs,” Friedman said.
“The developer has to be able to fight the good fight when it comes to proving it works for the township,” she added. “That will give more people the vote of confidence to keep trying.”
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