Q3 2023 Philadelphia Industrial Market Report
Philadelphia’s industrial long-term prospects remain strong as the region consistently attracts local, national, and international retailers, third-party logistics providers, and manufacturers. Overall, rent growth has normalized toward pre-pandemic levels, with annual rent growth of 9.6 percent as of the third quarter. This sector’s demand is fueled by e-commerce and same-day deliveries that benefit from the area’s population and efficient distribution of goods along East Coast interstates, as well as proximity to the Port of NY/NJ which continues to grow in container volume.
However, in the first half of 2023, macroeconomic uncertainty has led to a decline in leasing volume, as vacancies increased to six percent, with rents slightly decelerating. An anticipated leasing slowdown in late 2023 and an influx of new warehouse completions will likely boost vacancy rates in the short term. This quarter construction volumes were at the highest levels, despite a slowdown in demand. The region’s construction pipeline is high, at 18.1 million square feet. However, new construction starts have slowed dramatically, as institutional capital considers the risk outlook and construction debt financing is hard to obtain.
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