Giving up on Center City offices?

How weak is Center City as an office center? Commercial landlords in Center City are still asking office rents averaging in the mid (east of Broad St.) to high (West Market St.) $20s per square foot, which is about where they were 20 years ago; rents at many buildings are lower today, if you count the impact of inflation.

By contrast, rents in University City and the redeveloped Navy Yard district, in buildings that are mostly newer or lately renovated, are approaching $40/square foot, according to data collected by Lauren Gilchrist, research director at Jones Lang LaSalle's Philadelphia office. JLL says it's significant that rents have been rising a bit faster in Center City, up a compound annualized 2.2% since the start of 2010, vs. 1.2% in University City.

The next test of the Philly commercial market is due next year, when renovated space at the old department store warehouse (lately the Family Court Annex) at National Real Estate's East Market project, 34 S. 11th St. location (upstairs from the planned Mom's organic market) opens and starts to seek "creative" tenants. JLL expects National Real Estate Development and its partners will ask rents in the $32/sf range for that space, on the high side for Center City (especially east of Broad) but less expensive than new space farther out.

Analysts worry Center City will have a tough time filling the space to be vacated when Comcast moves into its one-million-sf-plus tower in 2017. The possible sale of Cigna Inc. could also result in higher Center City office vacancies. (Revised and corrected re Navy Yard landlords)