RESEARCH 3Q19

GREATER PHILADELPHIA
INDUSTRIAL MARKET
CONSTRUCTION LEVELS HIT NEW CURRENT CONDITIONS
HEIGHTS IN GREATER New speculative and build-to-suit projects broke ground this quarter, driving
PHILADELPHIA overall development levels up to an all time high of 7.9 MSF

Construction deliveries and total net absorption were nearly at equilibrium;

Greater Philadelphia’s industrial market has seen incredible growth in
thus the market vacancy rate remained stable at 5.2% quarter-over-quarter
this economic cycle, absorbing 34.0 million square feet in new tenancy
over the past five years. Developers were slower to respond to this pent-
up demand, particularly in suburban Philadelphia markets: Over the Average asking rents rose slightly from the second quarter to $6.36/SF.

same period, only 26.0 million square feet in new construction delivered.
However, in the past 12 months, development levels have accelerated
across the region, culminating in nearly 8.0 million square feet under MARKET ANALYSIS
construction in the third quarter of 2019, an all-time high for the market.
The majority of the space (70.0%) is speculative and available, which Asking Rent and Availability
should come as a boon to tenants still having difficulty finding modern
logistics space in the region. Although development levels are at new $6.50 14%

heights, the market has averaged well over 1.0 million square feet of net $6.00
12%
absorption per quarter since 2014, so there is certainly room for greater 10%
expansion in most parts of the market. $5.50
8%
$5.00
6%
PHILADELPHIA AND SOUTHEASTERN
PENNSYLVANIA SUBMARKETS $4.50 4%
3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 3Q19
The Southeastern Pennsylvania submarket accumulated nearly 500,000
Average Asking Rent (Price/SF) Vacancy (%)
square feet of net absorption this quarter. Vacancy remained
unchanged from the second quarter at 5.7%, the result of speculative
Net Absorption (SF, Millions)
warehouses that were delivered vacant. In total, five warehouse projects
completed, one of which, Urban Outfitters’ 309,000-square-foot
6
warehouse at 2501 Green Lane in Bucks County, was preleased.
4
Notably, all deliveries this quarter were in Bucks and Philadelphia
counties, where new development has been limited despite strong 2

demand. Over the past few years, new warehouse construction in 0

Southeastern Pennsylvania has been focused overwhelmingly on -2

Berks County, where developers have aimed to draw tenant interest in -4

3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 3Q19
modern distribution space away from the core of the adjacent Lehigh
Valley market, which also has seen historically high volumes of space
under development over the same period. Berks County is now facing MARKET SUMMARY
a vacancy rate of nearly 20.0%, which will increase as new space Current Prior Year Ago 12 Month
delivers by year-end. Quarter Quarter Period Forecast
Total Inventory 498 MSF 496 MSF 493 MSF 
Conversely, the rest of the Southeastern Pennsylvania market posted
Vacancy Rate 5.2% 5.2% 5.0% 
record-low vacancy rates for the third quarter; Montgomery County’s
Quarterly Net Absorption 1.2 MSF 1.1 MSF 0.6 MSF 
6.0% vacancy rate was the highest among them.
Average Asking Rent $6.36 $6.33 $5.41 

Under Construction 7.9 MSF 7.3 MSF 6.0 MSF 

Deliveries 1.3 MSF 0.6 MSF 0.5 MSF 

© NEWMARK KNIGHT FRANK | 2018 RESEARCH | 1

3Q19 PHILADELPHIA INDUSTRIAL MARKET

The development pipeline expanded to a new high of 5.0 million square
feet in the third quarter, with most projects located in Berks County –
but projects that commenced elsewhere in the market, such as the
100,167-square-foot warehouse at 2021 Woodhaven Road in
Philadelphia County, should provide some breathing room in a supply-
strapped environment. Groundbreakings this year have tended towards
a smaller scale, with the majority of projects under 200,000 square feet.
This indicates developers are in tune with tenant needs: the brokerage
community reports that modern space in the light
industrial sector (<100,000 square feet) is in high demand but
exceedingly scarce.
SOUTHERN NEW JERSEY SUBMARKETS
Southern New Jersey led the region in third-quarter absorption, netting
715,464 square feet of new occupancy. This pared vacancy down 20
basis points from the previous quarter to 4.0%. Distribution companies
drove the majority of absorption: In Burlington County, Veritiv
consolidated multiple facilities in Pennsylvania and New Jersey to
relocate into 361,630 square feet at the newly delivered warehouse at
160 Dultys Lane. In Gloucester County, SDR Distribution Services moved
into the 374,126-square-foot warehouse at 1245 Forest Parkway,
previously occupied by Nine West. Industrial demand
in the Southern New Jersey market is visible not only in the institutional-
grade new development sector, but also in second-
and third-generation space.
Average asking rents reacted to the sustained swell of demand by
increasing 6.2% year over year, closing the third quarter at $5.11/SF.
Although the delta between pricing in the Southern New Jersey market
versus Central and Northern markets remains a compelling reason for
requirements to push southward, that delta is narrowing: Recent deals
in Southern New Jersey charted rates in the mid-$6.00/SF range,
compared with the mid-$7.00/SF range commanded in deals struck
around the 8A-exit. The increasing cost of land for future warehouse
construction in Southern New Jersey will push rates higher to keep
development profitable. Yet for occupiers, rental rates are a small
percentage of total logistics costs; access and labor remain the most
important drivers for site selection, and Southern New Jersey’s market
delivers on both.
NEW CASTLE COUNTY
At 2.7% vacancy, New Castle County’s industrial market had no room for
growth in the third quarter, and its net absorption was essentially zero.
Market movement as of late has primarily manifested in build-to-suit or
owner-build activity, with Chemours’ and Dot Foods’ facilities still under
construction. Soon to join them is Dart Container, which announced this
quarter that it will lease a large distribution facility to be constructed in
Delaware, relocating from distribution centers in Maryland. Speculative
development possibilities also exist; between large sites at Boxwood
Road and in Delaware City, several million square feet of proposed spec
warehouse space is on the horizon.

LEASE/USER TRANSACTIONS
Tenant Building Submarket Type Square Feet

Barry Callebaut 1001 Industrial Highway Delaware County Expansion 186,000

Night Shift Brewing 401-15 Domino Lane Philadelphia County Direct 130,000

Canteen 150 Gordon Drive Chester County Direct 132,540

Provident Marketing 42 Runway Road Bucks County Renewal 121,840

SELECT SALES TRANSACTIONS

Building Submarket Sale Price Price/SF Square Feet

741 5th Avenue Montgomery County $5,700,000 $94 60,662

101 Mount Holly Bypass Burlington County $10,700,000 $89 120,493

2400 Weccacoe Avenue Philadelphia County $16,750,000 $59 283,500

9250 Ashton Road Philadelphia County $14,975,000 $51 295,000

© NEWMARK KNIGHT FRANK | 2018 RESEARCH | 2

3Q19 PHILADELPHIA INDUSTRIAL MARKET

SUBMARKET STATISTICS
Total Under Total Qtr YTD Warehouse R&D/Flex Total
Inventory Construction Vacancy Absorption Absorption Asking Rent Asking Rent Asking Rent
(SF) (SF) Rate (SF) (SF) (Price/SF) (Price/SF) (Price/SF)

Berks County 25,416,718 2,970,631 18.9 % -138,761 673,809 $3.99 $5.20 $4.15

Bucks County 57,146,331 360,240 4.5 % 226,071 245,249 $5.26 $9.30 $6.60

Chester County 37,282,175 60,000 4.7 % -119,622 198,226 $7.32 $9.64 $8.30

Delaware County 29,141,193 158,000 4.3 % 203,309 406,711 $4.91 $7.68 $5.36

Lancaster County 56,255,009 905,520 2.1 % -144,595 -208,356 $4.11 $8.59 $4.63

Montgomery County 71,446,991 176,700 6.0 % 326,501 221,160 $4.25 $21.72 $10.16

Philadelphia County 85,854,773 370,133 5.6 % 144,064 225,607 $5.46 $5.59 $5.01

Southeastern PA Total 362,543,190 5,001,224 5.7 % 496,967 1,762,406 $4.85 $12.81 $6.72

Burlington County 48,940,667 1,736,111 3.3 % 138,291 1,406,161 $4.47 $8.05 $5.46

Camden County 32,555,672 338,000 2.9 % -4,422 231,694 $3.25 $6.22 $4.59

Gloucester County 28,433,886 369,000 6.4 % 581,595 664,975 $4.80 $6.50 $5.04

Southern NJ Total 109,930,225 2,443,111 4.0 % 715,464 2,302,830 $4.32 $7.27 $5.11

New Castle County 25,096,912 500,609 2.7 % 3,803 -8,244 $5.49 $7.65 $5.05

Delaware Total 25,096,912 500,609 2.7 % 3,803 -8,244 $5.49 $7.65 $5.05

Market Totals 497,570,327 7,944,944 5.2 % 1,216,234 4,055,070 $4.76 $11.87 $6.36

SUBMARKET STATISTICS BY SUBTYPE

Total Total Qtr YTD Total

Under Construction
Inventory Vacancy Absorption Absorption Asking Rent
(SF)
(SF) Rate (SF) (SF) (Price/SF)

Warehouse/Distribution 159,550,323 6,734,130 6.2 % 606,322 3,049,055 $4.76

R&D/Flex 82,184,151 765,814 6.4 % 414,357 26,226 $11.87

General Industrial 255,835,853 445,000 4.1 % 195,555 981,711 $4.96

Total 497,570,327 7,944,944 5.2 % 1,216,234 4,055,070 $6.36

© NEWMARK KNIGHT FRANK | 2018 RESEARCH | 3

3Q19 PHILADELPHIA INDUSTRIAL MARKET

ECONOMIC CONDITIONS EMPLOYMENT BY INDUSTRY

Turbulence in the global economy surrounding trade wars, Brexit, Philadelphia MSA, Annual Average 2018
immigration, and American politics have had an impact on the
confidence of businesses and consumers in the U.S.: In August, the 4.0%
Mining/Logging/Construction
11.4%
University of Michigan’s national Consumer Sentiment Index posted its 6.2% Manufacturing
largest monthly decline since 2012. 4.1% Trade/Transportation/Utilities

9.2% 17.8% Information

Yet, job growth and the overall economic growth outlook is strong in the Financial Activities
Philadelphia Metro. The region accumulated 41,500 new jobs over the 1.7% Business & Professional
past 12 months, experiencing gains in all major sectors save a slight Education/Health
22.3% 7.4%
decline in the trade/transportation/utilities sector. The region’s growth
Leisure/Hospitality
in employment across a diverse group of well-paying industries should 15.9%
Other Services
be an economic engine that continues to power the local industrial
Government
market expansion. The Fed’s decision to cut interest rates in September
2019 may empower developers with additional incentive to pursue
Source: U.S Bureau of Labor Statistics
projects late in the development cycle.

UNEMPLOYMENT RATE PAYROLL EMPLOYMENT

Seasonally Adjusted* Total Nonfarm, Not Seasonally Adjusted,
12-Month % Change

11.3% 4.5%

9.0% 3.5%

6.8% 2.5%

4.5%
1.5%

2.3%
0.5%

0.0%
Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 -0.5%
Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19
United States Philadelphia, MSA
United States Philadelphia MSA

Source: U.S. Bureau of Labor Statistics. Local data not seasonally adjusted. Source: U.S. Bureau of Labor Statistics

CONSUMER SENTIMENT INDEX EMPLOYMENT GROWTH BY INDUSTRY

1966:Q1=100, Not Seasonally Adjusted Philadelphia MSA, August, 2019, 12-Month % Change
105.0
100.0 Total
95.0 Mining/Logging/Construction
90.0 Manufacturing
85.0 Trade/Transportation/Utilities
80.0 Information
75.0 Financial Activities
70.0 Business & Professional
65.0 Education/Health
60.0 Leisure/Hospitality
Other Services
Government
-2.0% 98.0% 198.0% 298.0% 398.0% 498.0% 598.0%

Source: University of MI Source: U.S. Bureau of Labor Statistics

© NEWMARK KNIGHT FRANK | 2018 RESEARCH | 4

3Q19 PHILADELPHIA INDUSTRIAL MARKET

PHILADELPHIA
1735 Market Street
Suite 3900
Philadelphia, PA 19103
215.561.8300

LISA DENIGHT ANGELO BRUTICO

Research Manager Research Analyst
215.246.2725 610.755.6969
lisa.denight@ngkf.com angelo.brutico@ngkf.com

Newmark Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in
historical statistics including availability, asking rents, absorption and effective rents. Newmark Knight Frank Research Reports are available at www.ngkf.com/research

All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Knight Frank (NKF) has not verified any such information, and the same
constitutes the statements and representations only of the source thereof, and not of NKF. Any recipient of this publication should independently verify such information and all other information that
may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient’s choice with regard to all aspects of that decision,
including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy,
broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.

© NEWMARK KNIGHT FRANK | 2018 RESEARCH | 5