Wednesday, October 5, 2016

Eastern PA One Of The Fastest-Growing Industrial Markets In US

by Steve Lubetkin,
The Eastern Pennsylvania Big-Box/Logistics Market posted strong gains across most submarkets so far this year.

Led by the Lehigh Valley/I-78 Submarket, where overall growth topped 8 percent year to date, the performance contributed significantly to overall market growth of more than three percent. This level of growth would rank the Eastern PA Region as one of the most-rapidly growing markets in the US.

The report is for influencing factors in six major North American distribution markets for industrial properties 300,000 square feet or larger. Supply chain modernization—which is still in its infancy—and positive e-commerce sector growth continue to bolster the US industrial real estate market, particularly big-box, which is experiencing a record number of tenants in the market.

Among the key findings in the research regarding Eastern PA:

Record construction deliveries - new deliveries topped 6.7 million square feet and are on track to total over 15 million square feet by year end.

Strong occupier activity – by mid-year there were more than six million square feet of new occupier transactions. The top five occupier transactions, included Starbucks (1.2 million square feet) in Manchester PA; An undisclosed user in Easton (1.1 million square feet); Hudson Bay (617,000 square feet) in Pottsville; Cal Cartage (538,650 square feet) in Bethlehem and Samsung (750,000 square feet) in Bethel.

Substantial rent growth – especially in the Lehigh Valley, where achievable market rents now top $5 per square foot.

Increased supply – primarily weighted by Central Pennsylvania/I-81 South, overall supply increased slightly, leading to a 38 basis point increase in vacancy rate from year end 2015.
Growing activity pipeline – new occupier activity and anticipated deals should result in a higher volume of transactions during the second half of 2016. With lower vacancies, higher effective rents and strong absorption, demand will continue to outpace supply in core markets.

In the extended New Jersey/Lehigh Valley/Eastern Pennsylvania market, demand from logistics and e-commerce users continues to make the region one of the most robust in the country. Big-box leasing activity has more than doubled between Q2 2015 and Q2 2016. During the first half of 2016, a total of 18.4 million square feet was leased, the most for a core North American market.

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