Office Leasing Jumps 20% In Greater Philly As Tenants Gain Confidence

The first quarter of a year tends to be relatively slow for office transactions, but that has not been the case for greater Philadelphia in 2026.

Tenants signed more than 1.3M SF of leases last quarter, according to Savills. That was up 26% from the prior quarter and 20% year-over-year. 

The number of leases signed last quarter, 142, was up 33% from Q1 2025. 

“There was quite a bump,” Savills Philadelphia Research Manager Daniela Stundel said.

“Tenants overall are more confident in making their decisions right now,” she added.

Six years after the pandemic emptied Center City skyscrapers and suburban office parks, companies finally have a sense of what their footprints need to look like in the hybrid work era.

Some are gobbling up an increasingly scarce supply of trophy space. JLL found that trophy office vacancy in the central business district — including Center City, University City and the Navy Yard — dropped below 10% for the first time since 2022.

Savills found that CBD trophy asking rents rose 8% quarter-over-quarter to $55 per SF, while the neighborhood’s Class-A rents grew 3.2% to $42.50 per SF over the same period. 

Much of the trophy growth was due to Gattuso Development Partners’ 3201 Cuthbert St. project coming online. The flex life sciences space being marketed to office tenants has higher-than-average asking rents, according to the Savills report.

“There’s been some encouraging stories of expansionary leasing and a general sentiment of optimism from some of our existing tenants,” Center City District Vice President of Economic Development Clint Randall said.

The city of Philadelphia’s 118K SF renewal at 4101 Market St., and CBS’ decision to remain in its highly specialized 74K SF broadcast studio at 1500 Spring Garden St., were among the largest deals in the quarter, according to the Savills report.

JLL found that 58% of the region's leasing activity last quarter happened in the suburbs. 

French construction firm Saint-Gobain’s 321K SF renewal in Malvern was a top highlight, but the brokerage reported that more than 80% of suburban office leases last quarter were new deals or relocations.

That includes insurance firm HSB’s upcoming move to a 41,700 SF space at Rubenstein Partners’ recently renovated Chesterbrook Campus in Berwyn. The company currently has a space 3 miles away at 595 Swedesford Road in Radnor.

“There is movement,” JLL Philadelphia Research Manager Emily Friedman said. “People are taking the opportunity to move into new space.”

In addition to first-quarter reports on the CBD and suburban markets, Friedman authored a study that analyzed tenant movements in Center City, University City and the Navy Yard between 2023 and 2025.

Tenants above 10K SF downsized about 8% over that period, which was less than half of the 20% rate JLL had been using as a standard before the study, Friedman said.

She found that 41% of leases grew a tenant's footprint over those two years, while just 35% shrank it and 24% kept it stable.

The downsizing and flight-to-quality trends have still caused problems for owners of some of greater Philly’s less desirable office properties.

Across the metro area, 34% of CMBS office loans were classified as distressed in a January report from Kroll Bond Rating Agency. This also creates challenges for prospective occupiers as owners struggle to pull together money for tenant improvements, Friedman said.

“They have a really hard time getting capital to sign leases … If anything, they’re not able to offer incredibly low rents,” she said.

“Buildings in distress only benefit the buildings that aren’t in distress,” she added.

The main path out for many of these owners are fire sales, which can present an opportunity for residential conversions.

The pipeline for those projects in the Philly region has surged 119% over the past year, according to a RentCafe report.

Randall highlighted the partial conversion that Dean Adler and PMC Property Group are plotting at 1500 Market, the city’s largest office property, and a similar project that TF Cornerstone and Alterra Property Group have undertaken a block away at the Wanamaker Building.

“That’s pretty incredible to have these buildings that bookend either side of City Hall, and here we are in 2026 understanding where both of these are going to go,” he said.

He also has a long-term vision for expanding retail activity around Rittenhouse Square into vacant ground-floor spaces under West Market office towers.

But retail tenants also require sizable TI budgets that distressed landlords aren’t able to provide.

“Not every office building is in a position to invest in retail deals,” Randall said. “It’s not as easy as matching up supply with demand.”