Friday, November 16, 2018

Lack of Quality Supply, Pent-Up Demand Driving Industrial Construction in Suburban PA

by Steve Lubetkin,
Speculative development of industrial properties is beginning to ramp up in response to a lack of quality supply in the construction pipeline.

Build-to-suit projects for Solar Manufacturing in Souderton and Global Packaging in Oaks began. Jacquet Mid-Atlantic and Force America have buildings planned in the Linfield Corporate Center.

Herring Properties’ 80,000-square-foot spec building in Bristol Commerce Center was leased to Hughes Enterprises prior to completion. The developer will be breaking ground in the fourth quarter on a 36-40’ clear +/- 300,000-square-foot spec building. Construction has commenced on the first 100,000-square-foot-plus buildings at Pennridge Airport Business Park and Park 309 in upper Bucks County. A 57,600-square-foot bulding is underway in Bristol Industrial Park and a 53,040-square-foot building in Valley View in Coatesville. Multiple other sites are in various stages of the development process in Quakertown, Hatfield, Chalfont, Blue Bell, Souderton, Harleysville, Chichester and Bensalem. There is the potential for 1.2 million of speculative development completions in 2019, the highest level since 2002.

“We are really seeing a lack of quality supply and pent up demand driving new development – and it’s expanding beyond the traditional distribution corridors. In Southern New Jersey, there has been consistent absorption of new product. Developers such as Whitesell, Dermody and Liberty are moving forward with spec projects.  In Philadelphia and suburban PA, there is potential for 1.2 million square feet of speculative construction in the coming year. Prospects seem good—there’s been strong interest in a proposed 300,000 square-foot spec building in Bristol by local developer Herring Properties.”  -

Key Market Trends – Suburban Pennsylvania

  • The vacancy rate remained at 5.2 percent in the third quarter.
  • Year-do-date absorption totaled just over 215,000 square feet, significantly behind last year’s third quarter level of 2.5 million.
  • The weighted average asking rent increased by 1.3% to $6.21 per square foot, triple net. Pro forma rents for new construction have topped $7.00 per square foot.
  • Investment activity was boosted by a large portfolio sale in Bucks County.

Key Market Trends – Southern New Jersey

  • The Southern New Jersey industrial vacancy rate increased slightly during the third quarter from 3.8 to 4.1%.
  • Year-to-date absorption is down year over year, but still strong at 2.5 million square feet.
  • Of the 2.3 million square feet of construction that is scheduled to be completed in the fourth quarter, two-thirds is still available.

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