Philadelphia Commercial Office Space for Rent

Q4 2025

Philadelphia Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Philadelphia commercial real estate (CRE) market is navigating a transformative period in late 2025, characterized by robust adaptive reuse and stabilizing fundamentals [2]. The Office sector is actively rightsizing, with a surge in conversions to residential use helping to mitigate vacancy in the Central Business District (CBD) [2]. Industrial markets are normalizing after a supply boom, though vacancy has ticked up due to recent deliveries [3, 4]. Retail remains a bright spot, driven by "culinary-driven expansion" and strong local demand [5]. Multifamily continues to show resilience, particularly in suburban submarkets, with occupancy holding firm near 94% [6, 7].

TenantBase Proprietary Data [10] highlights the distribution of active tenant demand over the last 90 days:

  • Retail/Storefront dominated market activity with 67.31% of all searches [10].
  • Warehouse was the second most active sector at 23.08% [10].
  • Office accounted for 9.62% of total search volume [10].

Office Market

Market Overview Philadelphia's office market is defined by an accelerating trend of office-to-residential conversions, which has removed over 1.1 million SF of inventory from the CBD, helping to counterbalance softening demand [2].

  • Vacancy & Availability: The overall vacancy rate in the CBD rose to 20.3% in Q3 2025, driven by sublease additions [2]. However, total availability has declined for six consecutive quarters to 24.0%, signaling that the supply glut is slowly burning off [2].
  • Net Absorption: The market recorded negative net absorption of approximately 95,983 SF to 587,233 SF in Q3, depending on the data provider [1, 2].
  • Rental Rates: Asking rents reached a record high of $32.06 - $33.47 per SF, driven by the removal of lower-tier stock and sustained demand for trophy assets [1, 2].
  • Market Drivers: Leasing activity surged in Q3 2025, nearly doubling the volume of the first half of the year [2]. "Flight to quality" remains a key theme, with tenants prioritizing amenity-rich spaces in the CBD West submarket [1].

TenantBase Activity [10]

  • Demand Share: Office accounted for 9.62% of total search volume [10].
  • Lease Term Preference: Demand is heavily skewed toward short-term flexibility [10]:
    • Less than one year: 37.93% of deals [10].
    • 2-3 Years: 31.03% of deals [10].
    • 3-5 Years: 24.14% of deals [10].
  • Size Requirements: Tenants seeking shorter commitments prefer significantly smaller spaces. The average lower SF required for a Less than one year term is 667 SF, compared to 1,500 SF for a 3-5 Years term [10].

Industrial & Warehouse Market

Market Overview The Philadelphia industrial market is facing a supply-driven adjustment, with vacancy rates rising as a wave of new construction delivers into a market with moderated leasing velocity [3, 4].

  • Vacancy & Rent: The overall vacancy rate increased to 8.0% across Greater Philadelphia, up 230 basis points year-over-year [3]. Despite this, asking rents grew 4.1% to $11.43 per SF, driven by premium Class A availabilities [3].
  • Demand & Supply: Net absorption was negative 1.0 million SF in Q3 2025, largely due to a major tenant bankruptcy [3]. However, year-to-date leasing volume is up 23.5% compared to 2024 [4].
  • Construction: The construction pipeline has cooled significantly, dropping nearly 60% from the prior year to 6.9 million SF, which should help stabilize vacancy in 2026 [3].

TenantBase Activity [10]

  • Demand Share: Warehouse accounted for 23.08% of total search volume [10].
  • Lease Term Preference: Demand is evenly split between short and mid-term options [10]:
    • 1-2 Years: 33.33% of deals [10].
    • 3-5 Years: 33.33% of deals [10].
    • Less than one year: 16.67% of deals [10].
  • Size Requirements: The average lower SF required for a 3-5 Years term is 1,917 SF, while the 5+ Years term average requirement jumps to 13,250 SF [10].

Retail Market

Market Overview Philadelphia's retail sector is performing well, buoyed by "culinary-driven expansion" and investor confidence in the region's density and spending power [5].

  • Vacancy & Availability: Fundamentals remain sound with healthy demand keeping vacancy rates low, particularly in high-traffic suburban corridors and Center City's dining districts [5].
  • Net Absorption: The market has sustained strong leasing activity, driven by both local restaurant debuts and national brand expansions [5].
  • Rental Rates: Asking rents are trending upward, supported by limited new supply and robust competition for prime storefronts [5].

TenantBase Activity [10]

  • Demand Share: Retail/Storefront activity dominated with 67.31% of all search volume [10].
  • Lease Term Preference: Retail tenants show a balanced appetite for terms [10]:
    • 3-5 Years: 33.33% of deals [10].
    • 1-2 Years: 24.44% of deals [10].
    • 5+ Years: 21.11% of deals [10].
  • Top Locations: Tenant interest is highest in the following areas (deal counts) [10]:
    • Philadelphia (City): 52 [10].
    • Delaware County: 10 [10].
    • Bucks County: 9 [10].

Multifamily Market

Market Overview The multifamily market remains resilient, with suburban assets outperforming the urban core due to demand for school districts and affordability [7].

  • Vacancy & Occupancy: Overall occupancy held strong near 94% in Q3 2025 [6]. Suburban properties maintained high occupancy, while some urban neighborhoods like Fishtown saw increased concessions due to supply competition [7].
  • Rents: Average asking rents rose over 2% year-over-year to $1,780 per unit [6]. Philadelphia is noted as a top-performing market for rent growth moving into 2026 [9].
  • Construction: Development activity has stayed muted due to high costs and zoning hurdles, reinforcing a persistent supply gap that will support future rent growth [7].
  • Investment: Investor sentiment favors suburban portfolios, with expectations for increased sales volume in 2026 as the market stabilizes [7].

2026 Outlook

Looking ahead to 2026, the Philadelphia market is positioned for growth as it emerges from a period of reset.

  • Investment Optimism: nearly 70% of real estate professionals express confidence in the market heading into 2026, up significantly from mid-year [8].
  • Multifamily Strength: With new construction starts down sharply, the region is expected to see rent growth accelerate to 1.9% in 2026, outpacing many national peers [9].
  • Office Transformation: The wave of conversions will continue to reshape the CBD, reducing overhang and creating a more mixed-use environment [2].

Sources

  1. Newmark: Philadelphia Office Market Report Q3 2025
  2. Cushman & Wakefield: Philadelphia CBD Office MarketBeat Q3 2025
  3. Newmark: Philadelphia Industrial Market Report Q3 2025
  4. Cushman & Wakefield: Philadelphia Industrial MarketBeat Q3 2025
  5. CBRE: Philadelphia Retail Figures Report Q3 2025
  6. Cosign: Philadelphia Multifamily Figures Report Q3 2025
  7. CBRE: Philadelphia Multifamily Figures Report Q3 2025
  8. Avison Young: 2026 US Commercial Real Estate Outlook
  9. CRE Daily: Multifamily Trends 2026 Market Shifts
  10. TenantBase Proprietary Market Data (Philadelphia - Last 90 Days)

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.