Newmark Knight Frank (NKF) released its second-quarter 2017 reports for the Greater Philadelphia region and the I-81/78 Corridor industrial markets this week. Greater Philadelphia’s industrial market closed the second quarter of the year with 540,000 square feet in positive absorption. While the vacancy rate stayed level from the first quarter of 2017, it has dropped 110 basis points from one year ago to 6.8 percent. Several warehouse buildings also delivered, while the I/81-78 Corridor continued to capture the majority of the construction pipeline.
The Southern New Jersey market accounted for 450,000 square feet in occupancy gains. The Burlington County submarket contributed the bulk of the gains, 500,000 square feet of absorption with Quality Packaging moving into 377,440 square feet at 2030 Route 130 in Florence, New Jersey. Vacancy in Southern New Jersey’s warehouse sector remained at record low levels in the second quarter of the year.
Kurt Montagano, NKF senior managing director stated, “Although this quarter was slower than recent trends would indicate, the market for warehouse properties remains extremely tight and rents for the overall Southern New Jersey area has continued to rise.”
In the Delaware market, tenant activity within the warehouse sector picked up after a slow first quarter. The sector reported 34,942 square feet in positive absorption, lowering the vacancy rate by 30 basis points to end at 12.0 percent. Overall rents in Delaware fell $0.06 per square foot to $4.50 per square foot, with warehouse/distribution rents falling the most ($0.17 per square foot to end at $4.52 per square foot).
Southeastern Pennsylvania’s vacancy rate, at 6.9 percent, remained flat for the fourth consecutive quarter. According to Eustace Wolfington, NKF senior managing director, “The market remains strong, and product is in sparse supply. Transactions as a whole are still difficult to complete; however, rents are climbing as competition for space drives vacancy down. Available user product for sale is also in short supply, which is running to the benefit of the Sellers. Class A product has a short shelf life which is moving the price points on the B & C product.”
The second quarter closed with 87,344 square feet in positive absorption for the market. Bucks County posted the largest positive absorption with 516,224 square feet of occupancy gains, followed by Philadelphia County with 110,416 square feet. Absorption in Bucks County was driven by Almo occupying 299,192 square feet at 16 E. Cabot Boulevard, and Amazon occupying 104,074 square feet at 2251 W Cabot Boulevard. In Philadelphia County, absorption can be attributed to Certified Moving and Storage occupying 39,400, and Menasha Packing occupying 53,000 at 700 E. Erie Avenue.
Vacancy for I-81/78 Corridor warehouse/distribution properties stayed level at 6.4 percent in the second quarter of 2017. Tim Brogan, NKF senior managing director, noted that “Construction has continued at a breakneck pace, eight million square feet of warehouse delivered over the last three quarters, and there is still almost eight million square feet under construction.”
Rents for warehouse product fell $0.05 per square foot to $4.39 per square foot. Overall, the Central Pennsylvania submarket recorded 1.6 million square feet in positive quarterly absorption, while the Lehigh Valley and Northeastern Pennsylvania submarkets posted just over 700,000 square feet and just over 400,000 square feet in positive absorption.
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