Monday, July 16, 2018

Philly & S NJ See Moderate Gains In Q2 2018

by Steve Lubetkin,
The Southern New Jersey market remains in good shape, making moderate gains and showing strong fundamentals. The firm believes the market may be poised for strong growth as benefits of the new tax law begin to materialize.
“Our market continues to show quiet strength and may take off as consumers and businesses feel the effects of lower tax rates. We expect the new law to be a net positive for overall economic growth in 2018 and be especially beneficial to the commercial real estate industry.”

There were approximately 303,656 square feet of new leases and renewals executed in the three counties surveyed (Burlington, Camden and Gloucester), a gain of about 10% over the previous quarter. Leasing picked up, and the sales market stayed active, with about 1.46 million square feet on the market or under agreement and an additional 317,961 square feet trading hands.
New leasing activity accounted for approximately 61.4% of all deals. Overall, net absorption for the quarter was in the range of approximately 253,000 square feet.

Other office market highlights from the report:

  • Overall vacancy in the market is now approximately 10.4%, which is nearly one point better than the previous quarter.
  • Average rents for class A and B product continue to show strong support in the range of $10.00-$15.00 per square foot triple net or $20.00-$25.00 per square foot gross for the deals completed during the quarter. These averages have stayed near this range for most of 2018, though they are trending a bit higher.
  • Vacancy in Camden County improved dramatically, to 11.6% for the quarter.
  • Burlington County vacancy was at 9.2%, which was also lower than the first quarter.

The Southeastern Pennsylvania reports on transactions, rates, and news from Philadelphia and the suburbs. Highlights from the second quarter in Pennsylvania include:

  • Philadelphia’s office market vacancy rate was unchanged during Q2 2018, though positive absorption was 547,339 square feet, a 20% improvement over the first quarter. Vacancy rates for class A properties stood at 10.5%, while class C properties had vacancy of 5.5%.
  • Average asking rent across all office property classes in the Philadelphia market was $22.72 per square foot in the second quarter. Within the CBD it was $29.64 per square foot.
  • There are about 3.8 million square feet of office space currently under construction in Philadelphia. During the second quarter 590,632 new square feet became available via completed new construction.
  • Philadelphia’s retail market is moving in the right direction. Average asking rents have jumped the past few quarters, net positive absorption was 909,884 square feet, and retail vacancy rates ticked down to 4.4%.
  • Industrial vacancy in Southeastern Pennsylvania was down to 5.6%. The market saw positive net absorption of more than 6.6 million square feet.

The Southern New Jersey and Philadelphia retail market highlights. The second quarter saw a drop in consumer confidence as well as a generally positive outlook for consumer spending, buoyed by a strong job market. Other highlights from the retail section of the report include:

  • Retail vacancy in Camden County stood at 7.7%, with average rents in the range of $13.75 per square foot triple net.
  • Retail vacancy in Burlington County stood at 9.8%, with average rents in the range of $14.59 per square foot triple net.
  • Retail vacancy in Gloucester County stood at 7.4%, with average rents in the range of $14.74 per square foot triple net.

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