Amazon Resumes Leasing Spree Along Pennsylvania’s I-81 Corridor

By Adrian Ponsen and Brenda Nguyen CoStar Analytics

Since Amazon’s first quarter 2022 earnings call when the company first disclosed it planned to address excess capacity in its distribution network, the e-commerce giant has slowed openings of new fulfillment centers and put more than 7 million square feet of industrial space up for sublease across the U.S.

According to its last annual report, during 2022, Amazon’s leased North American fulfillment and data centers grew at the slowest pace in at least seven years.

Pennsylvania’s I-81 corridor stands out as the region where Amazon is continuing to expand its distribution center network, despite taking a more defensive posture towards its North American real estate footprint overall.

Over the past 12 months, Amazon has signed three large industrial leases along Interstate 81 in Pennsylvania totaling 2.9 million square feet. The two largest deals, Amazon’s 1.3 million-square-foot lease at the recently completed Rausch Creek Logistics Center in Tremont, and its 1.1 million-square-foot lease at United Business Park in Shippensburg, have already made 2023 theI-81 Corridor’s busiest year on record for total square feet leased by Amazon.

The e-commerce giant is not just adding new I-81 distribution centers to its network, but it also appears to be fully utilizing the I-81 properties it already occupies.

Over the past 14 months, the company has been implementing cost-cutting measures, leading to the listing of more than 70 Amazon-leased industrial spaces across the U.S., totaling 11 million square feet. Most of these spaces are in older and smaller, distribution properties that are less cost effective for Amazon to operate and are being listed for sublease. But a significant share of the properties being put up for sublease are where the company has leases approaching expiration and has not yet renewed.

Major U.S industrial markets such as Atlanta, Chicago, Dallas and Philadelphia have each had at least four Amazon-leased spaces be put on the market as available since mid-2022. In stark contrast, while Amazon already occupies at least 8 million square feet across 13 different Pennsylvania industrial properties within 30 miles of I-81, none of these spaces have come available for lease.

Amazon’s persistent growth along I-81 likely ties back to the corridor’s ideal location for serving the I-95 population corridor stretching from Washington D.C. through Baltimore, Philadelphia and New York, arguably the largest cluster of purchasing power in the Western Hemisphere.

Key Pennsylvania markets along I-81 where Amazon has been leasing in recent years, such as Pottsville, Scranton and Harrisburg, each have between 30 and 40 million U.S. residents within a four-hour truck drive on a typical weekday morning. This is almost double the number of residents within a four-hour truck drive of other major population centers such as Los Angeles, Atlanta and Dallas.

For example, from its regional distribution center in Tremont, Pennsylvania, where Amazon signed its largest U.S. lease so far in 2023, delivery trucks can reach last-mile delivery stations near either New York, Philadelphia, Baltimore, or Washington within just a four-hour drive.

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Apartment Spring Leasing Season Sees Sign of Life in Philadelphia After Yearlong Slump

 

By Brenda Nguyen Costar

Following a dry spell throughout 2022, Philadelphia’s spring leasing season for apartments saw a moderate uptick in momentum, bringing some relief to developers and property managers. The spring leasing season generally sees the highest renter demand and often serves as a proxy for the remainder of the year. Based on this past spring's performance, demand is anticipated to pick up from 2022's slump, but remain below the five-year norm.

Despite the positive sign, leasing performance still fell short of the three-year, pre-pandemic norm. During the second quarter of the year, the Philadelphia metropolitan area recorded 2,112 rented units. This marked a significant increase from the mere 494 rented units during the same period last year.

Nevertheless, absorption, defined as the net change in the number of units occupied than vacated, still hovered below the second-quarter average of 2,600 units between 2017 and 2019. While 2021 was an anomaly, last quarter clocked in at only 48% of the 4,460-unit absorption peak achieved in the spring of 2021. The numbers may seem drastic, but the market is rebalancing to its long-term performance from an unprecedented market moment.

Despite a regional slowdown, several urban districts have continued to shine. Notably, the rapidly growing Art Museum-Northern Liberties and North Philadelphia sections of greater Philadelphia saw the highest absorption performance in the past 12 months, with 1,130 units and 1,120 units absorbed, respectively. These areas accounted for an impressive 65% of total absorption in the Philadelphia region. Despite their impressive performance, those areas still faced immense supply pressures, resulting in elevated vacancy rates in recent quarters.

In the suburbs, Burlington County, Conshohocken and Upper Montgomery County saw the highest absorption levels, ranging between 310 units and 360 units each over the past 12 months.

On the other hand, Upper Delaware County, Cherry Hill-Haddonfield and Lower Camden County experienced the lowest leasing activity in the region, with each area having negative absorption of at least 270 units.

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Top Property Sales Recognized for Philadelphia

As big-ticket items involving sizable investments, commercial property transactions often have a wider impact within the local community. 

Here are the Philadelphia property sales selected as the second-quarter 2023 winners of the CoStar Power Broker Quarterly Deal Awards:

TOP SALE: Port Logistics Center at Logan, 2961 US-322, Logan Township, NJ - Part of Portfolio

2961 US-322, Logan Township, NJ (CoStar)

Sale Price: Not disclosed*

Sale Date: June 29, 2023

Size: 1,774,748 SF

Buyer: Prologis, San Francisco, CA

Seller: Blackstone, New York, NY

Deal Commentary: California-based Prologis, the biggest owner of industrial property in the world, acquired a 72-building, 13.8 million-square-foot portfolio of industrial properties from opportunistic real estate funds affiliated with Blackstone for $3.1 billion in the second quarter's top deal. In addition to the property in Logan Township, New Jersey, the acquisition expanded its holdings in key distribution markets, including Atlanta, Baltimore/Washington DC, Southern California, Central Valley, SF Bay Area, Dallas, Las Vegas, New York/New Jersey, Phoenix and South Florida. Prologis and Blackstone have completed more than a dozen transactions together in the past decade.

*Part of a portfolio sale

TOP SALE: Twinbridge Industrial Parl, a Portfolio of 36 Properties

15 Twinbridge Drive, Pennsauken, NJ (CoStar)

Sale Price: $194,500,000

Sale Date: June 28, 2023

Size: 1,326,785 SF

Buyer: DRA Advisors, New York, NY

Seller: Walton Street Capital, Chicago, IL, and Wharton Equity Partners, New York, NY

Deal Commentary: A joint venture between Walton Street Capital and Wharton Equity Partners sold a 1.3 million-square-foot portfolio in New Jersey just outside of Philadelphia for $194.5 million to DRA Advisors. The sale of the Twinbridge Industrial Park, which has 37 properties in Pennsauken sold with PGIM Real Estate providing $103 million in fixed-rate financing to DRA Advisors. Wharton and Walton acquired Twinbridge, in July 2020 for $83.25 million from The Bloom Organization and since then added to the original 32-building park with several additional purchases. In the years since, they executed their value-add investment strategy by increasing rental rates, making property improvements, and filling nearly all of the 37 total buildings. A mix of high-profile tenants are included in the portfolio such as Lockheed Martin, Sprint, PepsiCo's SodaStream, and BlueTriton.

TOP SALE: The Heights at Glen Mills, 1000 Ellis Drive, Glen Mills, PA

1000 Ellis Drive, Glen Mills, PA (CoStar)

Sale Price: $74,000,000

Sale Date: April 24, 2023

Size: 222,413 SF

Buyer: Waterton and Waterton, Chicago, IL

Seller: Pantzer Properties, New York, NY

Deal Commentary: A Chicago multifamily investor made its foray into a Northeast market in a top second-quarter deal. Waterton closed on its purchase of The Point at Glen Mills located about 30 miles west of Philadelphia, marking its first acquisition in the area. Waterton paid $74 million for the 230-unit complex. Seller Pantzer Properties of New York paid $56.25 million for eight-year-old property in 2018. Located in the Philadelphia suburb of Glen Mills, Pennsylvania, it also is close to employment centers in both downtown Philadelphia and Wilmington, Delaware.

TOP SALE: Covington 380 Logistics Center, 180 First Ave., Gouldsboro, PA

180 First Ave., Gouldsboro, PA (CoStar)

Sale Price: $60,000,000

Sale Date: June 1, 2023

Size: 501,600 SF

Buyer: Hines, Houston, TX

Seller: Portman Holdings, Atlanta, GA, and Rockpoint, Boston, MA

Deal Commentary: The distribution building, Covington 380 Logistics Center, has traded hands in a second-quarter deal after signing a full-building tenant in the first quarter. Totaling over 500,000 square feet, the property was delivered in 2022 and was sold by a joint venture consisting of developer Portman Holdings and private equity company Rockpoint. In February, All-Ways Forwarding leased the entire facility

TOP SALE: Core5 at Codorus Creek Building 1, 405 Busser Road, York, PA

405 Busser Road, York, PA (CoStar)

Sale Price: $54,400,000

Sale Date: June 1, 2023

Size: 483,748 SF

Buyer: Cabot Properties, Boston, MA

Seller: Core5 Industrial Partners, Atlanta, GA

Deal Commentary: Cushman & Wakefield arranged the sale of a 483,770-square-foot industrial property located at 405 Busser Road in a top second-quarter transaction. Cabot Properties acquired the newly-built property that is fully leased to Hill’s Pet Nutrition, a subsidiary of Colgate-Palmolive.

TOP SALE: 9130 Griffith Morgan Lane, Pennsauken, NJ

9130 Griffith Morgan Lane, Pennsauken, NJ (CoStar)

Sale Price: $30,122,696

Sale Date: April 11, 2023

Size: 189,498 SF

Buyer: Puratos Group, Dilbeek, BCR

Seller: Wharton Equity Partners, New York, NY

Deal Commentary: Totaling nearly 190,000 square feet, the food processing facility on Griffith Morgan Lane sold in the second quarter for just over $30 million to Puratos Group. Built in 1980, the facility is fully leased to Royal Wine, a subsidiary of Kenover Marketing, a division of Kayco, although the buyer plans to renovate and occupy the building by 2025. Based outside Brussels, Belgium, the firm is a global provider of products, raw materials and applications to the bakery, patisserie and chocolate sectors.

TOP SALE: Student Housing Complex Near Lehigh University

Sale Price: $29,500,000

Sale Date: May 31, 2023

Size: 143,736.5 SF

Buyer: Amicus Properties, New York, NY

Seller: Beacon Assets, Causeway Bay, Hong Kong

Deal Commentary: A student housing portfolio totaling 383 beds near Lehigh University traded hands in a second-quarter sale arranged by GREA, formerly Rittenhouse Realty Advisors. New York-based Amicus Properties purchased the sprawling portfolio, which included 45 modern apartment units, 62 single-family houses, and one street-level commercial space, all located within a short walk of Lehigh University, Seller Beacon Assets acquired the portfolio in 2018.

TOP SALE: 525 Jaycee Drive and 675 Jaycee Drive, Hazleton, PA

675 Jaycee Drive, Hazleton, PA (CoStar)

Sale Price: $23,850,000

Sale Date: May 23, 2023

Size: 283,450 SF

Buyer: Bridge Investment Group, Sandy, UT

Seller: EAM-Mosca, Hazleton, PA

Deal Commentary: A two-building industrial portfolio totaling 283,450 square feet sold as a sale-leaseback transaction during the second quarter. Utah-based Bridge Net Lease acquired the two off-market manufacturing and distribution properties in Hazleton near the intersection of two interstate highways. The properties were fully occupied by the seller, EAM-Mosca Corp., which signed two 15-year absolute new leases with two additional 5-year options at the close of escrow.

TOP SALE: The Pavilion at Lansdale, 401-561S. Broad St., Lansdale, PA

401-561 S. Broad St., Lansdale, PA (CoStar)

Sale Price: $19,500,000

Sale Date: April 14, 2023

Size: 111,615 SF

Buyer: MBF Real Estate Holdings, Springfield, PA

Seller: J.C. BAR Properties, York, PA

Deal Commentary: The Pavilion at Lansdale shopping center was 96% leased at the time of sale to MBF Real Estate Holdings. Major tenants include Grocery Outlet, Dollar Tree, Pets Plus Natural, and Allure Salon. The sale was the upleg in the buyer’s 1031 exchange.

TOP SALE: Richland Plaza, 701-751 S. West End Blvd., Quakertown, PA

701-751 S. West End Blvd., Quakertown, PA (CoStar)

Sale Price: $16,700,000

Sale Date: June 1, 2023

Size: 206,501 SF

Buyer: Velocity Venture Partners, Bala Cynwyd, PA

Seller: AKL Associates, Easton, PA

Deal Commentary: AKL Associates sold Richland Plaza in Quakertown to Velocity Venture Partners for $16.7 million, or approximately $80.87 per square foot with plans to redevelop the retail property into industrial. Rebranded as Velocity 309, the location is in Upper Bucks County with direct frontage along Route 309. At the time of closing, the center was just 25% leased.

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Top Industrial Leases Recognized for Philadelphia

Prominent industrial leases signed by Amazon, Harley-Davidson and ID Logistics negotiated are among the second-quarter industrial leases recognized.

As big-ticket items involving sizable investments, commercial property transactions often have a wider impact within the community. 

Here are the Philadelphia industrial leases selected as the second-quarter 2023 winners of the CoStar Power Broker Quarterly Deal Awards:

TOP LEASE: 251 Westwood Hill, Tremont, PA

251 Westwood Hill, Tremont, PA (CoStar)

Space Leased: 1,347,493 SF

Deal Type: New Lease

Size: 1,347,493 SF

Tenant: Amazon

Deal Commentary: The rumors that Amazon was interested in leasing the first of two massive distribution buildings planned in the Rausch Creek Logistics Center proved to be true. Panattoni Development completed the first of two buildings totaling approximately 2,387,295 square feet planned in the logistics complex located off I-81 in February. The warehouse has 253 dock doors, a 40’ clear height, and over 800 parking spaces. Panattoni acquired the site in mid-2021 and plans to start work on the second phase by the end of this year.

TOP LEASE: York Business Center, 603-621 Memory Lane, York, PA

603-621 Memory Lane, York, PA (CoStar)

Space Leased: 785,910 SF

Deal Type: Renewal

Size: 1,525,000 SF

Tenant: Harley-Davidson

Deal Commentary: Popular American motorcycle brand Harley-Davidson renewed its lease at the York Business Center. The firm has assembled its motorbikes at this location since 2013. Spanning over a million square feet, the industrial complex is owned by Endurance Real Estate and ASB Real Estate Investments.

TOP LEASE: 150 Fort Motel Dr., Myerstown, PA

150 Fort Motel Dr., Myerstown, PA (CoStar)

Space Leased: 277,171 SF

Deal Type: New Lease

Size: 277,171 SF

Tenant: Saddle Creek Logistics

Deal Commentary: As part of a major national expansion of its existing warehouse and fulfillment operations, Florida-based Saddle Creek Logistics Services executed a deal to lease the recently built industrial facility owned by Dalfen Industrial in the Central Logistics Park off Fort Motel Drive. In addition to this location, the omnichannel, integrated supply chain company opened facilities in Kentucky and Illinois with plans to open a North Las Vegas, Nevada location in early 2024.

TOP LEASE: 1000 Coopertown Road, Delanco, NJ

1000 Coopertown Road, Delanco, NJ (CoStar)

Space Leased: 255,000 SF

Deal Type: Sublease

Size: 255,000 SF

Subtenant: ID Logistics

Deal Commentary: ID Logistics filled a large warehouse vacancy left by the April departure of Misfits Markets from this cold-storage facility owned by Provender Partners. ID Logistics is an international logistics and transportation company based in France. In March of 2022, the firm acquired Kane Logistics based in Scranton, Pennsylvania, to expand its East Coast presence.

TOP LEASE: 301 Bordentown-Hedding Road, Bordentown, NJ

301 Bordentown-Hedding Road, Bordentown, NJ (CoStar)

Space Leased: 213,000 SF

Deal Type: Renewal

Size: 213,000 SF

Tenant: Owens & Minor

Deal Commentary: Fortune 500 global healthcare product distributor Owens & Minor renewed the lease for its distribution center in Bordentown in a top second-quarter deal. The firm has operated out of the First Industrial Realty Trust-owned facility since 2016 as part of the New York distribution network for the company.

TOP LEASE: 499 Commerce Drive, Burlington Township, NJ

499 Commerce Drive, Burlington Township, NJ (CoStar)

Space Leased: 97,500 SF

Deal Type: Renewal

Size: 97,500 SF

Tenant: Alpi USA

Deal Commentary: Family-run, global logistics company with a focus on freight forwarding will continue to operate in its leased facility off Commerce Drive after renewing its full-building lease in the second quarter. Owned by EQT Exeter, the building features a prime location in Burlington Township with convenient access to Highway 295.

TOP LEASE: 1651 River Road, Burlington, NJ

1651 River Road, Burlington, NJ (CoStar)

Space Leased: 95,873 SF

Deal Type: Renewal

Size: 192,402 SF

Tenant: Ta Chen International

Deal Commentary: Ta Chen International, a master distributor of stainless, aluminum and nickel alloy products, inked a deal to fill the remaining space in Building 4 of the Burlington Industrial Park. The company has 21 other locations around the U.S. with international locations in Canada, Taiwan, and China. Owned by Greek Development, the warehouse property was developed by MRP Realty in 2017.

TOP LEASE: 801 Bridgeboro Road, Edgewater Park, NJ

801 Bridgeboro Road, Edgewater Park, NJ (CoStar)

Space Leased: 70,887 SF

Deal Type: New Lease

Size: 70,887 SF

Tenant: Armstrong Logistics

Deal Commentary: Armstrong Logistics inked a deal in Edgewater Park to expand its operations, becoming the sole occupant of this Bridgeboro Road facility. The company also inked an additional lease during the second quarter for over 80,000 square feet in Edison, Pennsylvania.

TOP LEASE: 145 Morgan Lane, York, PA

145 Morgan Lane, York, PA (CoStar)

Space Leased: 70,000 SF

Deal Type: New Lease

Size: 70,000 SF

Tenant: Lexora Home

Deal Commentary: Bathroom furnishing wholesaler Lexora Home leased this distribution center off Morgan Lane in York, as part of a relocation from Secaucus, New Jersey. Beginning in 2009 as a family business called First Look Bath, the firm has since expanded into cabinet manufacturing and distribution.

TOP LEASE: Alexander Court 3, 870 Calcon Hook Road, Sharon Hill, PA

870 Calcon Hook Road, Sharon Hill, PA (CoStar)

Space Leased: 53,000 SF

Deal Type: Renewal

Size: 53,000 SF

Tenant: Matheson Flight Extenders

Deal Commentary: Matheson Flight Extenders, a provider of mail-sorting services, renewed the lease for this entire distribution facility located in the Folcroft East Business Park. This distribution facility is owned by The Henderson Group of Media, Pennsylvania.

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