Demand kept pace with construction deliveries during the first quarter of 2013, pushing the overall vacancy rate laterally. Over the past year, the market posted average quarterly occupancy gains on the magnitude of 250,000 square feet. If demand growth persists at this rate, occupancy will reach pre-recessionary levels by mid-year, resulting it what should be upward pressure on asking rents, which sit 8.5% lower than their recent peak reached during 2008.
From a supply perspective, construction activity persists at pre-recessionary levels. As all of the 2.1 million square feet of soon-to-be delivered product is either owner-built or built-to-suit, oversupply in the short term is unlikely. The lack of speculative development is the sole feature placing this market in the recovery phase. But, with rent growth expected in the near term along the backdrop of reasonably low vacancy, expect speculative construction activity to start up over the next few quarters, pushing the market into the expansion phase.
Key statistics for the greater Philadelphia industrial market during the first quarter of 2013 are as follows:
• Vacancy Rate: 9.3%
• Absorption: 405,871 square feet
• Average Asking Rent: $4.89/SF NNN
• Warehouse/Distribution Asking Rent: $4.00/SF NNN
• R&D/flex Asking Rent: $7.38/SF NNN
Looking forward, the Philadelphia Federal Reserve Bank’s recent measures in manufacturing activity suggest a slowing trend in the short term. This should bear little effect on the demand trend for industrial space in the region given that the manufacturing sector shrunk its real estate footprint since the end of the recession yet the market nearly recovered all occupancy losses during the same time. Expect the wholesale and retail trade sectors to further add to tenancy gains as these sectors boast the lion’s share of demand growth over the past three years.
To access the full Philadelphia industrial report, visit /research. To speak with a NGKF local market expert, please contact Mira Matic at email@example.com.
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