Developers focus on Philadelphia’s prime locations

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The U.S. Industrial Outlook offers an in-depth analysis of property fundamentals, indicators and market drivers in the major industrial markets in the United States. The following briefs the latest developments in the Philadelphia market:

Speculative development is on the rise: Construction activity continues to be one of the prime drivers of the Philadelphia industrial market. Availabilities and vacancies are at all-time lows, encouraging speculative construction to address the needs of 30,898,500 square feet of active tenant requirements. Nearly 6,183,228 square feet of speculative construction is expected to break ground in the next year, with 12,274,185 square feet of speculative projects currently under construction. While demand continues to be strong, a large volume of construction has delivered vacant this year (81.5 percent), which may cause a favorable market shift for tenants by 2018 (Class A inventory is up).

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Landlords are pushing rents higher: Landlords are asking $4.95 per square foot on average at the 11 speculative buildings delivering in the market. They’re confident that strong demand will keep the market competitive for well-located, high-quality properties in the next year. Rents could start to level off as early as 2017 due to the large amount of speculative construction.

New construction, new investors: Outside investors are getting the opportunity to enter what has otherwise been a difficult market, thanks to new construction. Planned construction shows that the I-81 Corridor will get a boost in development from outside investors looking to capitalize on well-located sites.

 Notable investment sales:

  • Bentall Kennedy’s purchase of 103 Commerce Drive in Aston, Pennsylvania (247,401-square-foot distribution warehouse for $24,000,000)
  • AEW Capital Management’s purchase of 325 S. Salem Church Road in Newark, Delaware (785,400-square-foot warehouse for $60,000,000)
  • Industrial Property Trust’s purchase of 100 Louis Parkway (400,596 square feet for $28,850,000)
  • Endurance Real Estate Group’s purchase of 3747 Hecktown Road (307,290 square feet for $28,500,000)
  • Industrial Property Trust’s purchase of 9747 Commerce Circle (385,000 square feet for $27,500,000)
  • Watson Land Company’s purchase of 9658 West Hills Court (435,218 square feet for $43,347,713)

Notable leases:

  • New deals:
    • Amazon (613,920 square feet), Florence, NJ
    • Samsung Electronics (500,400 square feet), Bethlehem, PA
    • Behr Paints (241,852 square feet), Kutztown, PA
    • FedEx Ground (400,000 square feet), Macungie, PA
    • UPS (335,000 square feet), Carlisle, PA
    • Cal Cartage (541,500 square feet), Bethlehem, PA
    • Hudson’s Bay Company (618,000 square feet), Pottsville, PA
  • Renewals:
    • Ready-Pac (154,675 square feet), Swedesboro, NJ
    • UPS (324,000 square feet), Harrisburg, PA
    • Trinity Glass International (203,500 square feet), Breinigsville, PA

See how Philly compares to other markets here.