Newmark released its first-quarter 2018 reports for Greater Philadelphia and the I-81/78 Corridor industrial markets. The combined markets closed the period with 0.8 million square feet of occupancy gains. Quarter-over-quarter, the combined vacancy rate stayed flat at 6.6 percent as the market remained extremely tight. There were only two deliveries this quarter, both warehouse properties. 139 Fredericksburg Road in the Central Pennsylvania submarket delivered a 225,875-square-foot expansion that was promptly occupied by Ace Hardware, while 305 East Church Road in Montgomery County, a 49,102-square-foot building, delivered vacant. The I-81/78 Corridor continued to capture the majority of the warehouse pipeline, where, 8.9 of the combined markets’ 14.4 million square feet of new space is being built.
The Southern New Jersey market recorded 226,511 square feet in negative absorption, its first quarter of negative posting since the second quarter of 2015. The Camden County submarket experienced the greatest loss with 179,120 square feet of negative absorption, followed by Burlington County with 44,461 square feet and Gloucester County with 2,930 square feet. Quarter-over-quarter, overall vacancy in the market increased 20 basis points, but remains low at 4.2 percent. While vacancy in Burlington and Glouster Counties remained steady at 3.7 and 5.8 percent, respectively, vacancy in the Camden County submarket rose 60 basis points to 3.6 percent. Two major moves came as Bellmawr Laundry left 74,000 square feet at 281 Benigno Avenue in Camden County and AMF Holdings vacated 48,000 square feet at 1808 River Road in Burlington Township. Despite the slight uptick in vacancy, optimism for the future of the market remains high. According to Kurt Montagano, Newmark senior managing director, “Despite increasing rents in the Southern New Jersey markets, demand continues to outpace supply, creating spec and build-to-suit activity.”
The New Castle County, Delaware market slowed compared to fourth-quarter 2017, but remained active. The market reported 124,936 square feet in positive absorption, lowering the vacancy rate by 50 basis points from year-end 2017 to 15.3 percent. With the continued activity, rent in general industrial, warehouse/distribution, and R&D/flex sectors all increased, driving the overall rent up $0.14 to $4.67 per square foot. Lease rates for the R&D/flex sector had the highest gains, jumping $0.60 to $6.68 per square foot, while the warehouse and general industrial sectors ticked up $0.20 and $0.10, respectively, to $4.98 and $4.26 per square foot.
The Southeastern Pennsylvania market closed the first quarter with 273,109 square feet in occupancy loss. In Philadelphia County, Cardone Industries’ 1.325-million-square-foot distribution center, located at 5501 Whitaker Avenue, was put on the market for sale or lease. That disappointing news was offset by the following new deals: Dependable Distributions moved into 332,640 square feet at 9801 Blue Grass Road and 185,000 square feet at 11200 Roosevelt Boulevard, and Rainbow occupied 365,000 square feet at 2951 Grant Avenue. All things considered, vacancy for the quarter still ticked up 10 basis points to 6.4 percent, which is still considered extremely tight. Eustace Wolfington, Newmark senior managing director, had this to say; “Demand in the market for industrial space has intensified and lease rates are among the highest this market has ever seen. The scarcity of available properties is driving prices up, benefitting sellers and landlords.” This quarter, the overall lease rate rose $0.02 to $5.48 per square foot, the highest rate in over ten years. The R&D/Flex rate led the way, rising $0.09 to end at $9.06 per square foot - the highest rate ever posted by that sector.
Vacancy for I-81/78 Corridor warehouse/distribution properties stayed flat in the first quarter of 2018 at 6.8 percent. The market recorded 1.2 million square feet of positive absorption, half of the five-year quarterly average of 2.4 million square feet. Tim Brogan, Newmark senior managing director, noted, “Though the e-commerce boom in the warehouse sector continues, land and space to fulfill requirements are becoming scarce. 8.9 million square feet of spaces is currently under construction, while at the same time there are approximately fifteen 1.0 to 1.2 million square foot requirements, plus twelve 500,000 to 800,000 square foot requirements pursuing space in the market.” Along with slowing absorption, land scarcity is also driving up rental rates. The overall rate rose $0.08 to $4.44 per square foot, and all three market sectors experienced positive increases. The largest climb was in the warehouse and distribution and R&D/flex sectors, which both rose $0.11 to end at $4.50 per square foot and $7.68 per square foot, respectively. The $4.50 per square foot rental rate for warehouse properties is the highest since the third quarter of 2007.
Newmark (“Newmark”), operated by Newmark Group, Inc. (“Newmark”), is one of the world’s leading commercial real estate advisory firms. Newmark has over 4,600 employees in over 120 offices. Together with London-based partner Knight Frank and independently-owned offices, Newmark’s 15,000 professionals operate from more than 400 offices in established and emerging property markets on six continents. With roots dating back to 1929, Newmark’s strong foundation makes it one of the most trusted names in commercial real estate. We offer a complete suite of services and products for both owners and occupiers across the entire commercial real estate industry.
Our investor/owner services and products include investment sales, agency leasing, property management, valuation and advisory, diligence, underwriting and, under trademarks and names like Berkeley Point and Newmark Capital Markets, government sponsored enterprise lending, loan servicing, debt and structured finance and loan sales. Our occupier services and products include tenant representation, real estate management technology systems, workplace and occupancy strategy, global corporate services consulting, project management, lease administration and facilities management. We enhance these services and products through innovative real estate technology solutions and data analytics designed to enable our clients to increase their efficiency and profits by optimizing their real estate portfolio. We have relationships with many of the world’s largest commercial property owners, real estate developers and investors, as well as Fortune 500 and Forbes Global 2000 companies. For further information, visit www.ngkf.com.
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