King of Prussia’s diverse commercial real estate market continues to perform relatively well as we navigate through the challenges of the pandemic.
The vacancy rate for Class A office space increased nearly 1.5 points to 17.1% from the previous quarter and less than 3 points from the same time last year before disruptions from COVID-19. In that time, there was only a slight decrease in the reported average lease rate to $38.93/SF. Still, a strong rate per square foot.
Class B office vacancy increased by 1.5 points from the last quarter to 12.8%. This remains considerably lower than the rate for most of the past decade, including a 24.3% vacancy rate for Q1 2011. The reported average lease rate for Class B decreased slightly by $0.15 to $22.67/SF.
The vacancy rates for Class C office space experienced the greatest fluctuation over the past 12-months, jumping from 9.8% in Q1 2020 to 20.9% at the end of the latest quarter. However, the inventory in Class C office space is still small compared to the other classes in KOP with only 282,628SF over 13 properties. The average lease rate decreased over the same period by a dollar to $23.92/SF.
With all office classes combined, the vacancy rate at the end of Q1 2021 is 15.6%. This is a slight increase of 1.5 points from the end of 2020 but lower than the larger reported Suburban Philadelphia Market’s vacancy rate of 19.5% according to the CBRE Philadelphia Office Marketview. With over 11% of the 61M SF suburban Philadelphia office market, King of Prussia’s average lease rate is higher ($34.29/SF) than the overall suburban market ($27.61/SF).
The vacancy rate for industrial properties increased by half a point to 0.8% with no increase in the average lease rate of $10.68 NNN from the end of 2020. Flex properties remained steady with a 19.7% vacancy rate with an average lease rate climbing $0.63 to $38.71 NNN from Q4 2020.
Commercial retail space is holding its own as consumer spending continues to grow and the area moves closer to the end of the pandemic. CBRE Research reported that consumer spending has grown 115% in the Philadelphia region from January 2020 through February 2021. Consumer demand helped the vacancy rate in King of Prussia stay low at 3.4% with average lease rates increasing by $1.08 over the 12-month span to $26.81 NNN at the end of Q1 2021.
