P
hiladelphia's government is facing financial pressure due to the decline in office market values. The assessed value of offices in Center City dropped by over $1 billion from 2023 to 2025, a 10% decrease, according to the Office of Property Assessments. This decline poses a significant problem for the city, which relies heavily on tax revenue from commercial properties.

    Council member Jeffery Young Jr. emphasized that the city's tax base depends on Center City, highlighting the impact of declining values on municipal revenue. For example, the assessed value of 1500 Spring Garden dropped from $192 million in 2022 to $76 million this year, resulting in a $4 million annual loss for the city.

    Vacancy rates in Center City offices have remained around 20% as tenants downsize and adopt hybrid work arrangements. Tenants are often reducing their space by 25-40%, according to Brent Hutchinson of OPEX CRE Management. Lauren Gilchrist from Newmark warns that vacancies may worsen next year due to anticipated lease expirations.

    Even with the city's municipal workforce returning to the office full-time, daily foot traffic in Center City remains at only 63% of pre-pandemic levels. Over 10% of commercial mortgage-backed security loans in Philadelphia are in distress, and sales are typically happening at discounts from past trades.