By Brenda Nguyen CoStar Analytics
Philadelphia's record-setting industrial development boom is winding down after an unprecedented five-year stretch that saw 55 million square feet of industrial space added to the region's inventory. As of March, 12.4 million square feet remain under construction across the Philadelphia region, a 52% decline from the early 2023 peak.
The development slowdown, which mirrors the national trend, primarily stems from the growing backlog of vacant newly delivered buildings. Approximately half of the 32 million square feet of industrial space completed in the Philadelphia region over the past two years remains unleased. Compounding this issue, 80% of the current 12.4 million square foot development pipeline is characterized as speculative, with no secured tenants.
The growing inventory of vacant newly built facilities has increased Philadelphia's industrial availability rate by 420 basis points since mid-2022. The market now faces a double-digit availability rate of 10.4%, which exceeds the national average by 80 basis points.
Several Philadelphia industrial brokers have indicated that their landlord clients had sat on their vacant properties for longer than anticipated when many projects broke ground in 2022 and 2023, a period of robust demand.
However, as unanticipated carrying costs pressure landlords, they have become more open to subdividing their warehouses to cater to a wider range of tenants.
CoStar data for Philadelphia's industrial market shows that the median time it takes to secure a tenant has inched upward from 4.7 months to 7.3 months during this two-year period.
In response to these market conditions, the number of industrial construction projects has plummeted. Only 1.7 million square feet of new industrial space broke ground in the second half of 2024, the lowest two-quarter level since 2018.
The ongoing development pipeline of 12.4 million square feet represents a 1.9% increase in existing inventory—still outpacing the national rate of 1.5%. However, the current downward construction trajectory suggests less supply will enter the Philadelphia market starting in 2026. The pullback should provide time for demand to absorb the 30 million square feet of additional available space added since mid-2022.
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