Industrial rents in the important northeast and central Pennsylvania regions rose to a record $4.81 per square foot in the first quarter as vacancy rates dipped to a record 4.8 percent, according to a report issued yesterday by real estate services giant Cushman & Wakefield.
Industrial demand is so strong that despite additional supply expected to hit the market during the year, the average asking rent by the fourth quarter will be quoted at more than $5 per square foot, the firm forecast. The regions' industrial markets are key feeders for goods distribution throughout the densely populated Northeast and mid-Atlantic markets via Interstates 78 and 81. The new low in vacancies was triggered by 4.8 million square feet of "absorption," which is defined as new square footage being leased. This was more than double the 2.3 million square feet of absorption reported in the 2017 period, Cushman said. The Lehigh Valley sub-market continues to lead in new construction with nearly 7.7 million square feet of building underway, Cushman said.
The vacancy rate in 2017's first quarter stood at 5.1 percent. The region's historic vacancy rate is around 6.7 percent.
The spike in absorption was aided by construction completions such as a 1-million-square-foot project for transport and logistics giant FedEx Corp. in Allentown, Cushman said. The largest new lease was signed by At Home, a big-box home décor company, for an 800,000-square-foot building in Carlisle that had been vacated by industrial company Whirlpool Corp.
Asking rents are forecast to rise 3 percent by year's end, due largely to the delivery of 14 million square feet of new speculative construction expected to be delivered, said Jared Jacobs, Cushman's associate director-Philadelphia research. Jacobs added that vacancy rates should climb throughout the year due to a large amount of speculative construction to be completed.