Industrial developers migrate to Philadelphia’s southern counties

 By Brenda Nguyen CoStar Analytics

Amid a growing backlog of unleased speculative warehouse developments and heightened interest rates, developers have slowed construction on new projects in Philadelphia's industrial market. However, developers are banking on strong pent-up demand for industrial space with a pipeline of proposed projects that totals over 75 million square feet across 250 buildings, suggesting that development activity is likely to rebound quickly once market dynamics improve.

For context, the Philadelphia industrial market has been grappling with a large influx of new industrial space, with 50 million square feet added in the past three years and 70 million square feet added in the past five.

While not all 250 proposed projects are guaranteed to move forward, the majority are likely to do so. The proposed developments are concentrated in a few key areas, hinting at where future supply pressures will surface. Across the Philadelphia market, five local industrial hubs account for 60% of the region’s proposed development projects.

Previously, much of the industrial development activity in the Philadelphia region was focused on Burlington and Gloucester counties. But industrial construction activity has fallen in recent years due to double-digit industrial space availability rates in these localities.

As a result, many developers have migrated further south to outlying industrial hubs such as Salem and New Castle counties, the southernmost localities within the Philadelphia metropolitan area, as well as Bucks County to the north.

Subsequently, Salem County now leads the region with over 11 million square feet of proposed industrial space. New Castle County and Bucks County follow closely with approximately 10.6 million square feet of proposed new industrial space each. All three industrial hubs account for approximately 14% of the region’s proposed pipeline.

The significant number of proposed projects suggests that these Philadelphia-area industrial hubs will likely face supply pressures as they are built over the next several years. The high volume of proposed projects in these southern Philadelphia-area counties underscores the need for strategic planning to mitigate potential challenges as future projects hit the market.

www.omegare.com