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The expected conversion of PPL Towers to a residential property is expected to decrease the amount of office space available in Downtown Allentown. PHOTO/FILE
Colliers: Office occupancy continues to erode in the region
Stacy Wescoe//January 29, 2024//
Listen to this articleThe most recent report from Colliers International shows that the commercial real estate market didn’t end 2023 on a high note for office space in the region.
Office occupancy in the Greater Philadelphia market, which includes the Lehigh Valley, continued to erode with an overall loss of 2.8 million square feet during 2023 the report said.
The loss leveled off in the fourth quarter as Southern New Jersey, Lehigh Valley and New Castle County posted minor absorption.
However, despite some notable leases of sublet space, Colliers said the level of sublease space increased during the fourth quarter, hitting a new high of 4.7 million square feet, or 16% of total vacancy.
The Lehigh Valley’s vacancy rate decreased overall in the fourth quarter, but there was a sharp difference between Class A and B space.
Colliers said Class A vacancy dropped slightly from 13.8% to 13.6% while Class B vacancy increased significantly from 19.2% to 26.6%.
Class B sublease space has been steadily increasing as former Shift4 and St. Luke’s offices came on the market.
AFA Real Estate Partners acquired two buildings in Stabler Corporate Center.
Colliers added that the sale of the former PPL Tower in Allentown was moving forward and will likely be a residential conversion eliminating additional office space from the market.
Overall, across the region Class A office space had the most dramatic occupancy downturn, primarily stemming from larger tenants downsizing within aging Class A buildings.
Upper-tier Class A buildings look to benefit from the trend as tenants move towards smaller leases counterbalancing the higher rental costs associated with premium office space.
