Newmark Grubb Knight Frank (NGKF) released its first-quarter 2017 reports for the Greater Philadelphia region and the I-81/78 Corridor industrial markets this week. The two markets experienced a decline in overall vacancy, propelled by demand within the warehouse/distribution sector. Overall, occupancy gains were positive with increased activity from e-commerce and logistics firms. The I/81-78 Corridor continued to capture the majority of the construction pipeline.
Greater Philadelphia’s industrial market closed the first 90 days of the year with 2.2 million square feet in positive absorption. Vacancy fell 40 basis points from year-end 2016 and 120 basis points from one year ago. The Southern New Jersey market accounted for 2.1 million square feet in occupancy gains. The Burlington and Gloucester County submarkets contributed 1.4 million square feet and 515,252 square feet of positive absorption, respectively. Vacancy in Southern New Jersey’s warehouse sector reached a record-low 2.9 percent in the first quarter of the year. Kurt Montagano, NGKF senior managing director stated, “The extremely tight warehouse market propelled rent growth for Class A warehouse buildings over the last few quarters, but we are now seeing a trickle-down effect with rents increasing for Class B warehouses.”
Unlike the Southern New Jersey market, tenant activity within the warehouse sector stalled for New Castle County in the first quarter of 2017 where 126,522 square feet in negative absorption was reported. As a result, the warehouse/distribution vacancy rate increased 110 basis points to 12.3 percent over 90 days.
Southeastern Pennsylvania’s vacancy rate, at 6.8 percent, remained flat from year-end 2016. The first quarter closed with 111,825 square feet in positive absorption for the market. Dependable Distribution’s occupancy of 188,786 square feet at 7701 Edmund Street contributed to over 290,000 square feet of positive absorption recorded for the Philadelphia County submarket. Unfortunately, a number of mid-sized departures in Bucks and Delaware Counties countered those occupancy gains.
Vacancy for I-81/78 Corridor warehouse/distribution properties declined 160 basis points to 8.0 percent by the end of the first quarter of 2017. “Since 2014, almost 30 million square feet of warehouse space has been delivered within the Corridor,” notes Tim Brogan, NGKF senior managing director, “The market shows no signs yet of reaching the saturation point.” Rents for warehouse product continued to rise across all three submarkets within the I-81/78 Corridor. Overall, the Lehigh Valley submarket recorded 1.2 million square feet in positive quarterly absorption. The Central Pennsylvania and Northeastern Pennsylvania submarkets posted over 900,000 square feet each in occupancy gains.
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Newmark Grubb Knight Frank (NGKF) is one of the world’s leading commercial real estate advisory firms. Together with London-based partner Knight Frank and independently-owned offices, NGKF’s 14,100 professionals operate from more than 400 offices in established and emerging property markets on six continents.
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