Industrial Development Momentum Continues for Greater Philadelphia

Wayne, PA (October 14, 2019) — Newmark Knight Frank (NKF) released its third-quarter 2019 industrial market reports for Greater Philadelphia and the I-81/78 Corridor. The I-81/78 Corridor realized positive net absorption to the tune of approximately 751,000 square feet, regaining momentum following last quarter’s net occupancy losses, the first in a decade. Development in the Corridor remained at record levels, with 18.1 million square feet under construction. In the Greater Philadelphia industrial market, overall development levels hit an all-time high of 7.9 million square feet during the past three months.

In the third quarter of 2019, vacancy in the I-81/78 Corridor rose 50 basis points to 7.6 percent, the highest level since 2014. This increase came as a result of speculative supply additions outpacing demand, although millions of square feet in pending occupancies planned by year-end are likely to trim the vacancy rate in the fourth quarter. The largest occupancy in the third quarter occurred at 4532 United Drive in the Central Pennsylvania submarket where Lowes moved into the 1.2-million-square-foot warehouse that completed construction earlier this year. Development levels in the Corridor remained at record highs, with 18.1 million square feet across 30 projects under construction, posting an overall preleasing rate of 38.7 percent. Among the projects that broke ground this quarter was a 352,000-square-foot warehouse at 693 North Hills Road, at the site of a former industrial building that the developer, Endurance Real Estate Group, purchased and razed. This is the latest example in a growing trend of redevelopment or raze/new-build in the Corridor market. NKF Associate Director Nick Pickard noted, “First-class development sites are dwindling and as users seek modern logistics space, obsolete industrial buildings in prime locations have become greater targets for redevelopment.” Other examples of this trend include the renovation and expansion of the existing structure at 485 St. Johns Church Road in Central Pennsylvania and the redevelopment of Kraft Food’s demolished plant into Park 100 Logistics Center in the Lehigh Valley.

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