Q4 2022 Philadelphia Industrial Market Report | Logistics Set
Overall, the Philadelphia Region continues to be one of the strongest markets in the country. Vacancy increased 80 bps to 3.24%, reflecting a combination of new Construction Deliveries (15.3 MSF), Net Absorption (10.3 MSF), and some newly vacant second-generation space (836,000 SF). Rolling Construction levels are off 10% for the 2nd straight quarter, down 10.9 MSF from their Q2’22 peak; as it stands, roughly 80% of the 45.2 MSF underway is not committed. Given a trailing Net Absorption figure averaging 9.3 MSF per quarter, the current pipeline represents a m/l a one-year supply of space. High level that shouldn’t concern portfolio level owners much – even if leasing Demand and Net Absorption taper dramatically, it seems unlikely the market as a whole will approach structural vacancy levels in 2023.
Central PA led the way across the big four submarket clusters booking the highest Net Absorption and lowest Vacancy Rate for the second straight quarter. Steady Demand, rent growth and overall strong fundamentals persist there, as well as in the Lehigh Valley and Southern New Jersey. Northeast PA remains a bit of an enigma – Demand and Vacancy levels are encouraging, but 2022 Net Absorption was off relative to the 3Y trailing average, Construction activity is relatively high, and the Development Pipeline is outsized in comparison to the other markets.
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