The End of Flight to Quality?
JLL’s Mike Morrone, who's moderating next week's Bisnow Philadelphia Future of the Suburbs Summit in King of Prussia, is pretty handy in office market forecasting. And he sees good things for the suburbs.
And we mean handy—look at those thumbs go. Although 2013 ended with a decline in leasing volume, the PA 'burbs performed better than the previous year, with nine of the 14 submarkets tracked by JLL showing positive absorption. Mike is thumbs-up on the Plymouth Meeting/Blue Bell corridor, which saw 254k SF of growth. Mike says the general market is moving away from the flight to quality that led to Class-A tightening to what he calls a flight to efficiency. The lack of available Class-A product has also allowed owners to focus on updating Class-B space and offering it as a more economical solution.
Take Blue Bell's Arborcrest campus (above), which Md.-based COPT is renovating to LEED standards while incorporating a full array of tenant amenities. JLL, the project's agent, has brokered 150k SF in recent deals there and anticipates further signings. Class-A remains just as in demand, adds JLL’s Geoff Wright, with asking rents up $0.50/SF since 2012. Rents in trophy-markets such as Radnor (at over $37/SF) were second highest of all submarkets in the region (after University City). Wright further states that while deals on large space have dwindled, the market has seen an uptick in mid-range deals between 25k-50k SF. Mike adds that deals today are driven more by need and not just expiration dates as before.