In the evolving landscape of Philadelphia’s commercial real estate market between the first quarters of 2020 and 2024, distinct trends have emerged in major property sectors—retail, industrial, multifamily, and office. Contrary to expectations, the retail sector displayed remarkable resilience amid the pandemic, benefiting from robust consumer spending and restrained new construction.
Strong spending from consumers, fueled by the multiple stimulus checks and increasing wages during the pandemic years, combined with a scarcity of new retail construction, played a pivotal role in driving heightened demand for retail space among businesses. The conjunction of low-interest rates and easily accessible capital provided fertile ground for retail enterprises to expand, which bolstered the strong space-absorption throughout the Philadelphia region.
Consequently, Philadelphia’s retail vacancy rate dropped to 4.2% in the first quarter of 2024, reaching its lowest level since data tracking began in 2006.
On the other hand, the industrial sector faced short-term challenges due to an unprecedented development boom, resulting in an influx of new inventory that surpassed the demand. The industrial vacancy rate rose to 6.9% in the first quarter of 2024. Similarly, the multifamily sector experienced supply-related issues as the construction of 35,600 new apartments outpaced absorption, leading to a 7% vacancy rate in 2024.
In contrast, the office sector encountered a more prolonged and demand-driven obstacle, witnessing a significant increase in vacancy rates. While new office space continued to be constructed, the return of over 8.7 million square feet of existing office space to the market caused the office vacancy rate to climb by 3.2%, the highest among all property types in the region.
These diverse performances across Philadelphia’s commercial market highlight the unique opportunities and challenges each sector faces in the post-pandemic era. Whether it’s the surprising resilience of retail, short-term supply challenges in industrial and multifamily, or the long-term demand-driven struggles in the office sector, each segment is navigating its own trajectory in this dynamic environment.
Costar.com, Brenda Nguyen
