Q2 2023 Philadelphia Industrial Market Report

Greater Philadelphia continues to lead the east coast with the largest delivered inventory in the past 12 months (14.3 million square feet), most inventory under construction (26.1 million square feet), and the highest annual absorption (6.7 million square feet). With 23.8 million square feet under construction, volume is expected to exceed market demand, causing vacancies to rise. At a vacancy rate of 5.3 percent, the market remains competitive, with shrinking supply and land for construction. New construction and expansion of warehouses of 500,000+ square feet persist, where there is a shortage of sub 50,000 square foot small-bay warehouses. Sublease inventory has increased, which may stabilize rent growth.

Tenants have a leverage position for leasing large format (500,000+ square foot) warehouses, especially in secondary submarkets. Similarly, occupiers are in a strong leverage position to purchase large under-construction or vacant warehouses from merchant developers, particularly in less core locations, as investors modulate their risk appetites.

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