Greater Philadelphia's Industrial Market Refuses To Slow Down
Although other areas may be experiencing the beginnings of a slowdown in industrial real estate, no such concerns exist anywhere near Philadelphia.
Rents grew in every area of the Greater Philadelphia region in the first quarter, according to a CBRE report. That includes Philly, its suburbs in Pennsylvania, Delaware and South Jersey, as well as farther north in the Lehigh Valley, Central and Northeastern Pennsylvania.
Close to Philly, rents rose as new supply was a scarce commodity, as only 363K SF of new space is under construction (0.2% of total supply) in Southeast Pennsylvania and only 334K SF (1.4% of total supply) is being built in Northern Delaware. South Jersey saw considerably more activity, led by the completion of the 600K SF Holtec Technology Campus on Camden, New Jersey's waterfront. In all of those areas, rents rose considerably as what little space remains is hotly contested among potential tenants.
Overall, vacancy remained stable as only the least appealing assets remain on the market, and between the three aforementioned regions, average asking lease rate sat at $5.46/SF, the fourth straight quarter of increases.
In the I-78/I-81 corridor, the story might be even more encouraging. Over 14M SF is under construction, a number that has held steady since the start of 2017 due to users snapping up space as quickly as they can find it. Asking rents saw a year-over-year increase of 5.4% in the region, but even that number might be underselling the market's strength.
Demand has been so strong that a large percentage of what comes online does not hit the market. As a result, achieved rent is $1/SF higher than asking rent, and has grown 9.1% year over year, according to CBRE. What was labeled last year as the second-fastest-growing industrial market in the world is even seeing better-than-expected population growth forecasts, easing concerns about labor shortage to a degree.
