newsworthy
22 DC VELOCITY SEPTEMBER 2013 www.dcvelocity.com
The industrial real estate corridor encompassing
Philadelphia, central Pennsylvania, northern Delaware, and
southern New Jersey reported its best second-quarter
vacancy readings since before the Great Recession, with virtually all of the occupancy gains coming from an increase in
warehousing and distribution demand instead of traditional manufacturing.
The region, which covers about 14,000 square miles and
is bisected by Interstate 81 running north to south and
Interstate 78 running east to west, reported a vacancy rate
of 8. 2 percent in the second quarter, according to data from
Newmark Grubb Knight Frank, a New York-based commercial real estate advisory firm. Vacancy rates hit 9 percent
in the first quarter of 2013, according to Newmark Grubb
data. The highest vacancy rate in the past six years was 10. 9
percent in the third quarter of 2009.
Kevin McGowan, a Newmark Grubb director based in
the Philadelphia suburb of Wayne, said the market’s industrial vacancy rates haven’t been this low since mid-2007.
McGowan said demand for warehousing and distribution
services has grown by 23 million square feet since the first
quarter of 2008. By contrast, demand for manufacturing
and so-called flex space, which can be used in combination
with office, retail, and research and development operations,
grew by only 3. 6 million square feet, according to McGowan.
“Demand is [being] more driven by the supply chain
model,” McGowan said in an e-mail. He added that the I-
81/I- 78 corridor will become the “sweet spot” for regional
distribution in the mid-Atlantic region.
Though no new supply was added to the market in the
quarter, there were still 570,000 more square feet in the
pipeline at the end of the period than there were a year earlier, according to Newmark data. The central Pennsylvania
and Lehigh Valley regions, in particular, showed solid
improvement in the quarter, the firm said. While rental
rates in the regions are not increasing, landlords are making
fewer concessions such as free or significantly reduced
starting rents, Newmark said. The trend indicates that landlords are starting to gain leverage at the negotiating table,
according to the firm.
What could reverse the trend? A violent upward spike in oil
prices such as what happened in 2007–08, McGowan said. ;
Industrial vacancy rates in Philly at lowest levels in six years
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