Vacancy eased from mid-year highs, Class A demand led performance, and construction activity remains selective heading into 2026.

MECHANICSBURG, PA (January 12, 2026) — Lee & Associates of Eastern Pennsylvania has released its Q4 2025 Industrial Intel Market Report, highlighting a region that ended 2025 on firmer footing than it started. After a softer early-year period, leasing traction improved into year-end and the broader Eastern Pennsylvania industrial market posted a more constructive late-year tone across multiple submarkets.

Regionwide vacancy ended Q4 at 8.66%, down from a mid-year peak of 9.50%, reflecting progress as the market continues to work through the “hangover” of prior speculative deliveries most concentrated in areas such as Metro Philadelphia and Southern New Jersey. Despite elevated vacancy in select areas, demand continued to land across the region, supporting three straight quarters of positive momentum and helping shift conditions toward greater balance.

“2025 started slower due to economic uncertainties, but the market clearly regained its footing through the second half,” said Heather Kreiger, Principal and Regional Research Director for the Lee Pennsylvania offices. “What we’re seeing now is an uneven but real recovery with vacancy easing in some submarkets, stabilizing in others, and demand is still hitting across the region as tenants work through decisions that were delayed earlier in the year.”

One notable dynamic heading into 2026 is the widening gap between vacancy and availability, partially tied to growing sublease inventory and additional space being marketed ahead of vacancy. Sublease stories vary widely by tenant and situation, but overall, the trend is meaningful because it can shape competition and timing in lease-up even as vacancy gradually improves.

From a demand standpoint, Class A space was a key driver of performance, and leasing activity in 2025 was led by a mix of users, most notably 3PLs, distributors, manufacturers, e-commerce/retailers, and food & beverage manufacturers.

On the supply side, construction activity is transitioning to a more selective pipeline. The region ended the year with 20.7 million square feet under construction, with starts in certain submarkets (specifically Northeast PA and Central PA) while other areas remain in a lower-construction phase after several years of outsized deliveries. Overall, development is active but at a more sustainable pace than the post-COVID surge.

The report also notes that the region’s pre-construction pipeline remains large, though it has been for some time, and many projects are being held for tenant requirements, capital readiness, and site timing with some proposals shifting toward alternative uses such as data centers.

 

Regional Breakdown:

• Central PA: Central PA continues to lead the region as the strongest big-box logistics market, finishing the year near late-2024 vacancy levels with steady demand setting the tone heading into 2026.
• Lehigh Valley: Lehigh Valley closed 2025 with stronger back-half leasing and two straight quarters of occupancy gains, while rising sublease space is keeping availability elevated heading into 2026.
• Northeast PA: Northeast PA rebounded after a Q1 churn-driven reset, ending the year back near structural vacancy levels and showing renewed development momentum in Q4.
• Metro Philadelphia: Metro vacancy remains elevated but stabilized, with tenant demand still landing even as the market works through the prior cycle of speculative deliveries and a slower construction pipeline.
• Southern New Jersey: Southern New Jersey continues to post real demand and positive occupancy momentum, with vacancy beginning to trend down as the market absorbs several years of heavy Class A deliveries.
• Delaware: Delaware’s overall market conditions remain stable and closely tied to I-95-driven demand and limited new supply.

 

About the Q4 2025 Industrial Intel Report

The Lee & Associates Industrial Intel Report is a quarterly analysis of industrial market performance across 43 counties in Pennsylvania, New Jersey, Delaware, Maryland, Virginia, and West Virginia. The report tracks over 674 million square feet of inventory in Eastern Pennsylvania alone, focusing on leasing activity, vacancy trends, construction, and development.

Report availability: The full Q4 2025 Industrial Intel Market Report is available upon request.

 

About Lee & Associates of Eastern PA

Lee & Associates is a full-service commercial real estate firm with offices in Mechanicsburg, Plymouth Meeting, & Pittsburgh PA. The firm’s Research division provides deep market intelligence and custom analytics across key industrial submarkets in the Northeast and Mid-Atlantic.

Media Contact:
Heather Kreiger, CCIM
Principal and Regional Research Director for the Lee Pennsylvania offices
hkreiger@lee-associates.com | 610.590.1007