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Philadelphia’s Industrial Development Shifts Gears in 2024

 

By Brenda Nguyen Costar

Following a record year of building completions in 2023, Philadelphia's industrial development momentum has slowed down considerably in early 2024. Increased financing costs and an accumulation of unleased inventory have prompted developers to exercise caution as industrial rent growth slows across the market.

The industrial leasing heydays of 2021 and 2022 propelled developers to pursue a record-breaking volume of new development in recent years. In 2023 alone, nearly 21.7 million square feet of industrial space spanning 80 buildings were completed, including six structures exceeding 1 million square feet.

Industrial development activity was concentrated in Burlington, Bucks, Cecil and Gloucester counties, which collectively accounted for 80% of the industrial space completed over the past 12 months.

This recent surge brought Philadelphia's three-year cumulative delivery total to 52.7 million square feet, reflecting a substantial 7.7% growth in the region's industrial footprint. However, the surge in new supply pressured Philadelphia's industrial vacancy rate to rise from a historic low of 4% in mid-2021 to 7% in the first quarter of 2024. In particular, Burlington County has reached a 12% vacancy rate—among the highest in the region.

However, the number of new industrial projects starting construction has incrementally subsided as developers and lenders adopt a more cautious approach. New construction starts across the region have declined by 50% from 2022 levels.

As the number of new developments underway has dwindled, the Philadelphia region will see a quieter year in terms of completions in 2025. This development slowdown is expected to align with an anticipated improvement in economic growth and a reduction in interest rates, potentially strengthening leasing demand just as the reduced amount of new space hits the market.

In the meantime, with another 11.4 million square feet underway, the average vacancy for industrial space is expected to trend upward for several more quarters before stabilizing.

The amount of available inventory has already grown by 50% to 61 million square feet within the Philadelphia region in the first quarter of 2024, a stark contrast from the 40.5 million square feet that were listed as available in mid-2022. Industrial property owners should anticipate a more competitive lease-up environment through at least mid-2024.

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Victory Brewing Co. completes a Sale Lease Back Chester County facility for $21.79M

 By Emma Dooling – Reporter, Philadelphia Business Journal

Victory Brewing Co. has sold one of its Chester County properties, and will use the money to fund upgrades at its other locations.

The Downingtown craft brewer sold its 212,000-square-foot Parkesburg brewery and taproom for $21.79 million in late January to New York asset manager Fortress Investment Group LLC, according to property records. The transaction was a sale-leaseback and will not impact the facility's operations, John Struble, CFO for Artisanal Brewing Ventures, the parent company of Victory Brewing, told the Business Journal.

"The commercial property market is active, and this was a pure financial transaction for us," Struble said in a statement.

Victory Brewing acquired the 42-acre property for $10.75 million in 2016, several years after its operations at the site began. The facility started bottling and brewing in 2013, and a 10,000-square-foot taproom was added to its offerings in 2015.

The brewery now has a 25-year lease on the facility, located at 3127 Lower Valley Road, with multiple options to extend it up to 40 years.

Artisanal Brewing Ventures plans to reinvest the money it received from the transaction into marketing efforts and facility upgrades at some of its locations. Struble said a "significant portion" of the funds allocated for facility renovations will go toward updates at the Parkesburg brewery and taproom but did not disclose what the project will entail.

In addition to the Parkesburg facility, Victory Brewing also operates a brewery and taproom in Downingtown and taprooms in Kennett Square; Philadelphia; and Charlotte, North Carolina; The Philadelphia location, the brewer's newest taproom, opened in October 2021 at 1776 Benjamin Franklin Parkway in Center City.

Full story: http://tinyurl.com/4xum288j

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