Dir: +1 215 928 7505
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103
Main: +1 215 925 4600
Fax: +1 215 925 1040
7535 Windsor Drive
Allentown, PA 18195
+1 610 770 3600
Eight Tower Bridge
161 Washington Street
Conshohocken, PA 19428
+1 610 684 1850
300 N. Second Street
Harrisburg, PA 17101
+1 717 730 3752
1317 Route 73
Mount Laurel, NJ 08054
+1 856 234 9300
300 Delaware Avenue
Wilmington, DE 19801
+1 302 425 4000
The regional industrial market had a strong performance during the first two quarters. Vacancy decreased despite the completion of 8.1 million square feet of speculative construction and the shutdown of three larger manufacturing facilites in Chester, Montgomery, and Lehigh counties.
Over 50 percent of the new speculative space was leased prior to or shortly after completion. The speculative buildings over 800,000 square feet have had a longer lease up time. Due to the complexities of site selection, occupiers generally delay the final building decision as long as possible and then expect quick occupancy and operation. There are prospects for these larger buildings but an anticipated time delay for lease commitment is common.
Asking rents increased in all submarkets. Free rent periods have decreased and the gap between asking and signing rents is generally below 10 percent. Warehouse rents range from $3.25 to $5.00, depending on age and specific location. New generation bulk warehouse rents range from $4.75 to $5.25 per square foot.
The vacancy rate decreased to 7.2 percent in the second quarter of 2016. Larger transactions included Ocean Desert Sales’ expansion within the market to Tomlinson Road and Maryland-based Regency Furniture’s purchase of Deb Shops’ former warehouse. Changes to Pennsylvania’s wine and beer system are expected to increase activity by beverage distributors.
WuXi AppTec’s new 145,000-square-foot facility at the Navy Yard will be the largest gene manufacturing operation in the country.
The vacancy rate of 7.1 percent was down from the end of 2015 but was up slightly from the first quarter. Occupancy was impacted by the shutdown of Quad Graphic’s facilities in Atglen and East Greenville. Aside from these vacancies, leasing activity was strong. There is an additional large deal pending that will take down a major vacancy in Quakertown.
New construction has been increasing. In addition to FedEx and smaller spec facilities in Montgomery County, construction will be commencing on a 210,000-square-foot build-to-suit for Turn 14 Distribution in Hatfield. Exeter Property Group has begun site work on the expansion to 8 Lee Boulevard in Malvern.
Industrial demand continues to absorb vacancy and spur new construction. The vacancy rate decreased to 9.5 percent. H&M and AHR moved into new buildings in Burlington County. E-commerce is a growing demand sector with Jet.com’s lease of a newly completed spec building in Salem County and Wayfair.com’s 98,000-square-foot lease in Burlington County.
Fieldlink leased space from Dermody Properties in Gloucester County. This building will join the 393,120-square-foot spec building under construction. Liberty’s 613,920-square-foot building in Florence has been preleased by Amazon. First Industrial has 577,200 square feet underway at a neighboring site. VCS Shoes plans a new 683,000-square-foot warehouse in Westampton.
The New Castle County industrial market improved significantly during the first two quarters of 2016. The vacancy rate decreased to the lowest level in five years and year-to-date absorption was at the highest level since 2012. Additional
requirements in the pipeline for the third and fourth quarters may result in a further decrease in the vacancy rate, possibly by one to two percentage points.
Johnson Controls is planning to add 75,000 square feet to its manufacturing facility in Middletown.
The vacancy rate ticked up during the first quarter but dropped during 2Q to 3.2 percent. Four spec buildings were completed year-to-date, with two preleased prior to completion by California Cartage and Behr Paints. Only Griffin Land’s 252,000 square feet remain vacant. The six speculative buildings completed in 2015 have all been leased.
Five additional spec buildings are under construction, the largest of which is Liberty Property Trust’s 1.2 million square feet. Uline’s two buildings, totaling 1.67 million square feet, will be completed in the third and fourth quarters.
Vacancy was down year-to-date but up during 2Q to 7.4 percent. There were positive trends. Hudson Bay Company leased the 455,000-square-foot building on Keystone Boulevard in Pottsville which had been vacant for three years. ProLogis is expanding this building by 175,000 square feet for HBC. FedEx has 312,356 square feet underway in Grimes Industrial Park. Both FedEx and HBC will be vacating other facilities.
The delivery of 3.8 million square feet of spec construction resulted in a jump in vacancy to 7.4 percent. Starbucks leased Hillwood’s 1.2-millionsquare-foot building in York and UPS leased 355,000 square feet in a 2015 spec building in Carlisle.
The I-81/I-78 split in Lebanon County, I-81 Exit 44 in Carlisle, Exit 24 in Shippensburg, and Exit 8 of I-83 have been the most active areas for new development.
Click here to download the full report as a PDF.
The Eastern Pennsylvania Big-Box/Logistics Market posted strong gains. Overall market growth was over 3% in the first half of 2016.
Trends, Forecasts, and Perspectives in Commercial Real Estate
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