Two of the nation’s bulwark industrial real estate markets continued to show strong growth in the first quarter, according to a report published Wednesday by Colliers International Group Inc., a real estate services firm.
The market adjacent to the key truck corridors of Interstates 78 and 81 in eastern and central Pennsylvania saw 5.6 million square feet in new transactions, with volume up 32.9% year over year amid growing interest in central and northeastern Pennsylvania locations, according to Colliers. Constrained supply has resulted in asking rents rising to $8.47, up 18.9% from this time last year.
In the greater Philadelphia, southern New Jersey and Burlington County, New Jersey, region, which encompasses the Interstate 95 and New Jersey Turnpike corridors, asking rents climbed 13% year over year, accompanied by record lease rates. Overall vacancies rose to 7.5% from 3.1%, a figure skewed by an abnormally high 15% rate in suburban Burlington County. The vacancy rate for Burlington is expected to drop below 7% by year’s end, Colliers predicted.
In eastern Pennsylvania, construction starts have slowed versus the historic levels seen in the past few years due to changes in interest rates and the normalizing of consumer demand post-pandemic. Deals signed thus far in 2023 include three of over 1 million square feet, according to Colliers.
Amazon.com Inc. (NASDAQ: AMZN) has remained active in the market unlike in other areas of the country where it has pulled back, Colliers said.
There are 62.2 million square feet of projects in the development pipeline, and a multitude of tenants with requirements larger than 500,000 square feet that are currently active in the market.
According to Colliers’ Senior Managing Director Mark Chubb, “capital market constraints and economic uncertainty has led to a major decrease in new construction starts over the past 12 months. Starts are down 57% from the 12 months period preceding. An uptick in occupier demand in Q1 2023 and strong future occupier demand will lead to sustained growth in market wide rental rates over 2023.”
In the greater Philadelphia area, there are currently five existing availabilities totaling 3.82 million. The average occupier transactions in the region currently stand at 1.05 million square feet.
As with central and eastern Pennsylvania, the Philadelphia region will experience high levels of construction entering the market this year. Yet the locals are undeterred. According to Colliers’ Senior Vice President Tom Golarz, “new deliveries continue to achieve record setting lease rates. Even with substantial inventory slated to deliver in 2023, Landlords are bullish on the leasing market and remain patient in evaluation of deals in the market.”