Industrial Development Levels Make Dramatic Jumps

Wayne, PA (July 17, 2019) — Newmark Knight Frank (NKF) released its second-quarter 2019 industrial market reports for Greater Philadelphia and the I-81/78 Corridor. New supply was the foremost topic as the total construction pipeline across the two markets increased by 5.4 million square feet. Also, notably, the I-81/78 Corridor realized a rare quarter of negative absorption. However, market activity indicates overall fundamentals in the two regions will remain strong throughout the remainder of the year.

In the second quarter of 2019, the development pipeline in the I-81/78 Corridor industrial market expanded to a record-breaking 18.6 million square feet. Although there are millions of square feet of tenant requirements in the market, the decade-long streak of positive absorption finally broke this quarter due to struggling national retailers closing regional distribution centers. 1.1 million square feet of negative absorption was recorded, and 2.1 million square feet of new speculative inventory delivered vacant. As a result, vacancy jumped from 6.3 percent to 7.1 percent quarter over quarter, its highest measure in three years. The Central Pennsylvania submarket was responsible for the largest share of negative absorption with Sears and Kmart closing warehouse facilities in the region. The Lehigh Valley submarket accumulated 337,211 square feet of new tenancy driven by third-party logistics firms and maintained its standing as the epicenter of new development, with more than 6.5 million square feet of construction underway. In Northeastern Pennsylvania, the supply pipeline nearly doubled this quarter, from 3.5 to just under 6.5 million square feet, the highest quarterly construction total on record for the submarket. Speaking on the subject of this substantial increase, NKF Executive Managing Director Jim Belcher noted, “Warehouse users want to be in the Lehigh Valley, but the tightening labor supply is a real issue. This is starting to drive developers and tenants up into Northeastern Pennsylvania.”

Major big-box occupancies are slated to occur next quarter, which will eclipse the negative absorption sustained in the second quarter and ensure the Corridor market concludes the second half of the year on a positive note.

In Greater Philadelphia’s industrial market, 2.4 million square feet broke ground in the second quarter, driving the supply pipeline up to 7.3 million square feet, a five-year high. There was construction underway in every one of the eleven counties that comprise the tri-state regional market, with the Southeastern Pennsylvania counties responsible for the largest share. Commenting on the expansion of the construction pipeline, NKF Managing Director Justin Bell said, “the majority of Southeastern Pennsylvania’s warehouse inventory was built before 1980. This new supply of efficient, high-bay space will be a boon to the market’s warehouse users.”

Average asking rents skyrocketed in the Greater Philadelphia industrial market this quarter reaching $6.33 per square foot, up almost a full dollar from last quarter. This was largely a function of newly established rates on R&D/flex space at the rebranded and repositioned Discovery Labs complex in the Philadelphia suburbs.

Occupancies in recently completed warehouse space predominantly drove the quarter’s net absorption, totaling 1.8 million square feet. Market-wide vacancy, down 30 basis points from the first quarter to 5.1 percent, is expected to hover in the low 5.0 percent range through the rest of the year, while pent-up demand in the market for modern logistics space continues to drive the absorption of new additions to the inventory.

In the Southern New Jersey industrial market, ecommerce giant Amazon yet again represented the largest quarterly move-in, taking possession of the 650,000-square-foot warehouse at 240 Mantua Grove Road upon its completion. Aside from the development focus on the warehouse sector in South Jersey, a significant manufacturing project was launched in the market this quarter: ResinTech broke ground on a $130.0 million global HQ in Camden County, which will be used to consolidate multi-state operations when complete in 2020. Moving westward into the New Castle County market, available industrial space is as scarce as it can be with vacancy at 2.7 percent in the second quarter. This tightness has driven average asking rents beyond $5.00 per square foot for the first time ever.

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Warehouse Rents Rise with Increased Demand

Philadelphia, PA (April 12, 2017) — 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.”

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Tenant Consolidations Negatively Impact Greater Philadelphia’s Market

Philadelphia, PA (April 5, 2017) — Newmark Grubb Knight Frank (NGKF) released its first quarter 2017 office reports for the greater Philadelphia region. The reports detail increased vacancy from tenant consolidations in the Philadelphia suburbs and Philadelphia Central Business District (CBD). As a result, quarterly absorption was negative for greater Philadelphia at 464,424 square feet. Rent growth moderated or decreased slightly in suburban markets but asking rents for Class A space in the CBD continued on an upward trajectory.

The CBD closed the first quarter of the year with 358,347 square feet in negative absorption. Four of the five tracked submarkets within the CBD reported an uptick in vacancy from year-end 2016. “Despite the initial negative impact to the CBD,” notes Craig Scheuerle, NGKF executive managing director, “the return of large blocks of non-trophy, Class A space will not weigh heavily on rents in premium buildings as tenants remain hungry for quality space in prime locations.” The University City submarket had 226,000 square feet returned to the market by the Children’s Hospital of Philadelphia (CHOP) as it prepares to occupy a new facility by the South Street Bridge. In the West Market submarket, PNC Bank renewed and downsized by 135,000 square feet at 1600 Market Street.

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NGKF Completes the Sale of Delta Pointe’s Lot 7 to the Shaner Hotel Group

Wayne, PA (October 31, 2016) — Newmark Grubb Knight Frank (NGKF) is pleased to announce that Tim Brogan, Tim Pennington and Steve Bonge of NGKF’s suburban Philadelphia location, have completed the sale of Lot 7 at Delta Pointe on behalf of the owner, Delta Commerce Park Developers, LLC, to the Shaner Hotel Group of State College Pennsylvania.

The Shaner Group will be constructing a Fairfield Inn and Suites by Marriott on the 5.11 acre lot and is currently searching for a national restaurant partner.  The Shaner development team is finalizing their development strategy and preparing to advance the construction of the Fairfield Inn and Suites in early 2017. Future plans for the 5.11 acre lot include construction of a second hotel to join the hospitality center at Delta Pointe.

“We are very excited to expand Shaner’s central Pennsylvania’s hotel presence with our second hotel in Mechanicsburg. We are looking forward to servicing the region with our newest quality hotel,” said Plato Ghinos, president of The Shaner Group.

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