Center City Office Market Finished 2025 Strong, Driven By Trophy Leases

Nearly six years after the pandemic left Center City devoid of commuters, the neighborhood’s office market has finally settled into a new normal defined by disproportionate tenant interest in trophy properties.

Philadelphia’s central business district experienced a particularly robust end to 2025, with JLL counting 578K SF of leasing volume in Q4. This was more than a third of the neighborhood’s leasing activity for the entire year, according to JLL Managing Director Alex Breitmayer.

“We are busier today than we were any day in the last five years,” the office broker focused on Center City said.

“Conversations we haven’t had in a long time are starting to happen again,” he added.

This activity has tightened the market for top-tier office space and could lead demand to spill into the tier below, but older buildings with high vacancy still face the risk of foreclosure. 

The central business district — which Savills defines as Center City, University City and the Navy Yard — recorded 1.7M SF of office leasing in 2025, according to the firm's Q4 report, up 61.8% from 2024. 

Across the metro area, tenants snatched up 4.2M SF of office space, the highest the metric has been since 2022 and up 15.3% from the year prior.

The relocation of Datavault AI’s headquarters from Oregon to 23K SF at One Commerce Square, announced in October, was cited as a sign of vitality by Savills Research Manager Daniela Stundel.

She also mentioned leasing activity from law firms including Hogan Lovells and Duane Morris.

Center City District Vice President of Economic Development Clint Randall highlighted KPMG’s expansion into almost 25K SF at 1735 Market St. 

Both deals dwarf the 5K SF to 10K SF leases that define most office transactions in the neighborhood, he said.

“Full-floor deals are kind of rare in Center City,” Randall said. “When you have a quarter when tenants are leasing entire floors or multiple floors, that’s a big deal.”

The activity hasn't been spread evenly across the neighborhood.

Trophy properties fielded 43% of all leases in the CBD last year, according to a Cushman & Wakefield report, which found they constitute 28% of the area's overall stock. 

That left the 11.3M SF trophy segment with a vacancy rate of just 9.8%, while the others all had more than 20%.

Savills found that trophy rents in the CBD rose 8.4% year-over-year to more than $50 per SF, while Class-A saw growth of 1.7%.

The flight-to-quality trend isn't new, but as it continues to eat away at trophy vacancy, a constricted construction pipeline — which JLL found to be entirely preleased — could shift demand toward upper Class-A buildings.

Breitmayer said he is in discussions with Class-A owners interested in making renovations to attract new tenants. 

“What Philly really lacks is new product,” the broker said.

But he believes the city is unlikely to get any more new office development unless a project is anchored by a large prelease. 

The limited pipeline is indicative of a market that remains constrained compared to the city's pre-pandemic environment.

“We’re definitely moving into the end stage of recovery. Not quite into the next stage where maybe you see expansion,” Stundel said.

“Availability levels are not overall where they were pre-pandemic when we were in a good part of the cycle,” she added.

The Savills report also cited a “looming debt crisis” that could see more lenders seizing buildings this year — particularly older buildings in the low Class-A, Class-B and Class-C segments — but it is not yet clear how that will play out.

Stundel believes lenders are more likely to continue extending loans, which has been their default practice since the pandemic cratered the office sector.

“I don’t think lenders really want to be landlords,” she said. “They’re most likely going to work out a deal.”

Randall said it is hard to make generalizations about what will happen since these discussions play out differently for each building.

He believes Center City has more certainty on the debt front now than it did this time last year after several distressed buildings advanced through the foreclosure process or traded.

That includes 1650 Arch St., a building across from Comcast Center previously owned by ASI Management, and Shorenstein Properties’ 1818 Market St., which both entered receivership last year.

The city’s largest office property at 1500 Market St. hit the market as a potential conversion play in August following its 2023 slide into foreclosure under the ownership of Nightingale Properties and InterVest Capital Partners.

Several other Market Street towers traded at steep discounts around that time. That included 2000 Market St., which sold for 58% less than it did in 2018, and Ten Penn Center, which PMC Property Group snatched up for just 40% of its 2006 value. The latter property is now slated for a partial residential conversion.

“Every time we lock in the future or the trajectory of a given building, it takes one piece off the board, which helps stabilize the whole picture,” Randall said.