In the past five years, Philadelphia’s industrial rent growth saw cumulative gains of 57.6%, surpassed only by Phoenix and Atlanta. This growth rate is nearly 16 percentage points higher than the national average of 41.7%. The surge in local rents can be attributed to the demand during the booming years of 2021 and 2022 when the supply of available industrial space hit a record low. New demand formation has made it competitive for businesses seeking locations, driving rents upward.
While landlords are still reaping the benefits of this demand, tenants nearing the end of their leases are facing significant increases in rental costs. For instance, a tenant who signed a lease for a 25,000-square-foot warehouse at $6 per square foot in 2019, paying a base rent of $150,000 annually, could see the rent spike closer to $235,000 if the existing landlord brings the rent to market rates.
Philadelphia's rent gains have surpassed those of nearby Northeast markets such as Boston and New York, reinforcing its position as a vital logistics hub within the regional corridor. Despite the recent performance, Philadelphia's average rent of $11 per square foot is still more affordable than that of Washington, D.C., at $17; New York and Boston at $16 each; and northern New Jersey at $15.50.
Several factors have fueled this remarkable rise in the industrial market, including land availability, lower operating costs and a strategic location within a day's drive of over 40% of the U.S. population.
Additionally, the ongoing expansion of the Port of Philadelphia has significantly contributed to this growth. The modernization and deepening of the Delaware River channel have both enabled larger vessels to dock and increased cargo volumes, thereby driving demand for warehouse space near the port. In mid-2024, the port reached a new record of 750,000 twenty-foot equivalent units. TEU is used to meausre the capacity of container ships and ports. This port in particular forecasts cargo volume to double to more than 1.5 million TEUs by 2040.
Looking ahead, Philadelphia's industrial market shows no signs of slowing down. With an annual growth rate currently at 4.1%, it ranks fourth among the top U.S. markets for rent growth. The ongoing expansion of logistics infrastructure combined with its advantageous location and relative affordability indicates Philadelphia will maintain its competitive edge in the national logistics network for years to come.
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