Philadelphia, PA, August 5, 2024 – Lee & Associates of Eastern Pennsylvania is pleased to announce the release of its Q2 2024 Industrial Market Report, providing comprehensive insights and analysis into the industrial real estate market across Eastern Pennsylvania and surrounding submarkets, including Southern New Jersey, Delaware, Northern Maryland, Northern Virginia, and Northern West Virginia.

Key Findings:

1. Overall Market Trends:
   • Vacancy rates across the Philadelphia Region have risen for the second consecutive quarter, now approaching structural vacancy levels. This increase is driven by over 4.5 million square feet of speculative construction deliveries, a growing inventory of sublease space, and waning demand levels​​.
2. Submarket Highlights:
   • Central Pennsylvania (CPA): This region saw a slight increase in vacancy to just over 5%. However, it remains resilient with strong rent growth and high pre-leasing commitments​​.
   • Lehigh Valley (LHV): The vacancy rate increased, with 70% of vacant space in blocks over 500,000 square feet, indicating ongoing demand challenges​ in the Lehigh Valley market​.
   • Northeast PA (NEPA): Vacancy dropped by 20 basis points, bolstered by key leases totaling just under 2 million square feet. Net absorption returned to positive territory as a result​​.
   • Southern New Jersey (SNJ): The region experienced a sharp rise in vacancy to 11.79%, highlighting a potential 2-3 year oversupply due to speculative construction​.
   • Philadelphia Metro: Continued struggles with rising vacancy and negative net absorption were noted, marking the seventh consecutive quarter of increasing vacancy​​.
   • Delaware (DEL): Maintained a modest vacancy rate at 5.39%, with a boost in absorption due to a few key leases signed in Q2​.
3. Construction and Development:
   • Construction starts are expected to be limited for the remainder of 2024 and into 2025, providing the region an opportunity to absorb some of the oversupply and stabilize the market​.
4. Demand and Absorption:
   • The Philadelphia Region's industrial market is seeing a mix of resilience and challenges, with certain areas like Central PA and NEPA showing strong fundamentals despite broader market pressures.
5. Additional Submarkets:
   • Lower I-81 (L-81): Declining construction levels and five straight quarters of positive net absorption have significantly reduced vacancy, now down 223 basis points from a high of 12.8% at the end of 2023. However, the market remains competitive with five fully vacant buildings over 600,000 square feet.
   • Baltimore I-95 North (I-95): Three consecutive quarters of better-than-average net absorption have resulted in a steady decrease in vacancy levels, now down 266 basis points from a high of 12.18% in Q3 2023. The development pipeline remains strong with over 20 million square feet, although new speculative development is approached cautiously.
   • Frederick: The development pipeline continues to grow, with new starts likely in the next 12 months as interest rates decrease and speculative development margins become more attractive. The market remains tight with minimal statistical changes expected in the near term.

 

About Lee & Associates:

Lee & Associates of Eastern Pennsylvania LLC is the leading commercial brokerage and asset service provider specializing in industrial, office, retail, land, and investment sectors of the Greater Philadelphia Region. We influence the market across the region, including the Lehigh Valley, Central Pennsylvania,  Northeastern PA, Philadelphia, Southern New Jersey and Delaware. Our offices in Central PA and Suburban Philadelphia became part of the Lee & Associates national network in 2015, and we expanded our operations to  Western Pennsylvania in 2023, further cementing our position as the top player in the industry. With solid local ownership and a robust platform, our nationwide Lee & Associates offices continue to set new standards of excellence and growth.

At Lee & Associates of Eastern Pennsylvania LLC, we are the leaders in commercial real estate. Our services include expert guidance in buying, selling, and leasing commercial properties, as well as property management. Our team will work tirelessly to maximize your returns. Our tailored strategies will help your company achieve its occupancy and financial goals.

Our team is reliable and responsive and puts your needs first in every interaction. We communicate effectively to make sure we understand your requirements and provide the best possible solutions. Choose us to be your partner in commercial real estate and discover why we stand out among other industrial real estate companies.

For more detailed information and analysis, please contact us for a copy of the full Q2 2024 Industrial Intel report.

 

Heather Kreiger, CCIM
Regional Research Director - Lee & Associates of  Pennsylvania
610.590.1007
hkreiger@lee-associates.com