Greater Philadelphia Industrial
Greater Philadelphia Industrial www.cbre.com/research
Second Quarter 2011
Total Vacancy Rates
11.9%
Direct Lease Rates
$3.69 NNN
Total Net Absorption*
1.89 MSF
Construction
0.11 MSF
Yr.
Qtr.
* The arrows are trend indicators over the specified time period and do not represent a positive or negative value. (e.g., absorption could be negative, but still represent a positive trend over a specified period.)
Hot Topics • POS Tuning, a producer of displays at retail point of sale, opened their new North American headquarters at 173 Edgemoor Road in Wilmington, DE. • The U.S. Department of Transportation awarded Amtrak $450 million to upgrade their Philadelphia to New York City service, which will make it the fastest train in the U.S. • Flower Foods, of Thomasville, GA, purchased Tasty Baking Co. for $175 million with plans to retain all employees and local facilities. • Bloom Energy will build a manufacturing hub in Newark, DE to employ 900 people, with an additional potential of 600 jobs created through co-located suppliers.
The Philadelphia Suburban industrial submarket saw just over 230K SF of positive total net absorption. Leasing and investment activity in this submarket is consistent with tenants and buyers filling available space. Two transactions of note include Communications Test Design, Inc.’s, extension of 314,521 SF at 200 West Stewart Hudson Drive, Chester County, PA; and, Volpe Enterprises’ purchase of 40K SF building at 217 Church Road in North Wales, PA. As available product continues to be absorbed, landlords are less likely to “blend-and-extend” current leases in favor of market rate deals. Although construction activity is at a low point when compared to last quarter and to this time last year, developers are gearing up to begin projects, especially in Central PA. As big box product begins to diminish, the demand for new product will increase. Several speculative projects are in the pipeline that will appeal to users of single and multi-tenant operations. On the positive side, LKQ Corporation leased 108,160 SF at 275 Cross Farm Lane in York County, PA.
In the Northeast PA submarket, companies are honing in on developing real estate strategies as more transactions are taking place and properties trade hands. IBC Holdings purchased 6 Doughten Road, New Kingston, PA, a 330K SF distribution facility and Baker Properties purchased a 352K SF distribution facility at 955 Oak Hill Road, Mountain Top, PA. The Philadelphia County, PA industrial submarket showed positive total net absorption. Penn Jersey Paper significantly contributed to the increased absorption after occupying their brand new 255,336 SF built-to-suit space at 9355 Blue Grass Road, Philadelphia, PA. Additionally, Sysco Food Services recently moved into their newly completed 139K SF facility at 600 Packer Avenue, Philadelphia, PA. In New Castle County, DE, total net absorption ended on the positive side filling 188,141 SF of industrial market space. The State of Delaware contributed to the total positive net absorption in leasing 64K SF of warehouse space at 220 Lisa Drive in New Castle, DE at the Parkway Business Center. In the Southern New Jersey submarket several companies contributed to the positive market absorption. E-Commerce and logistics center provider, CoLinx, signed a lease for 25K SF at 1251 Metropolitan Avenue in Thorofare, NJ. K.S.I Auto Parts leased 41,200 SF at 8295 National Hwy in Pennsauken, NJ. Another notable transaction this quarter involved Mapei Corporation’s acquisition of a 231K SF distribution facility at 2155 High Hill Road, Bridgeport, NJ.
(%) Total VacancyTotal Rate Vacancy Rate 11.9% Direct LeaseLease Rate Rate $3.69 NNN
Vacancy vs. Average Total Vacancy vs. Average DirectTotal Asking Lease Rate Direct Asking Lease Rate
$4.10
16.0% 14.0%
$4.00
12.0% $3.90
10.0%
$3.80
8.0% 6.0%
$3.70
4.0% $3.60
2.0%
Per Square Foot Per Year (NNN)
Change from last
Current
Total Vacancy Rate (%)
Quick Stats
The Lehigh Valley submarket continues to remain strong with declining available space. Posting just over one million square feet of positive total net absorption, the Lehigh Valley submarket continues to outpace neighboring markets with the total availability rate under 10%. Participating in this trending growth, United Bank Card, Inc. will move its current operations and headquarters to 2202 N. Irving Street in Hanover Township, PA. The move will relocate 180 jobs and create 175 jobs once the expansion is complete.
$3.50
0.0% 2Q2009
3Q2009
4Q2009
1Q2010
2Q2010
3Q2010
4Q2010
1Q2011
2Q2011 © 2011, CB Richard Ellis, Inc.
MARKET STATISTICS - 100,000 SF AND LARGER AVG. Minimum ASKING LEASE RATE ($NNN/PSF/YR)
0
0
605,223
$4.03
13.0%
0
0
353,756
$3.69
23.3%
23.3%
0
0
259,574
$3.08
148,681,066
11.7%
12.8%
0
0
1,056,168
$3.51
Chester County, PA
12,375,101
6.3%
6.3%
0
0
(28,530)
$3.77
Delaware County, PA
11,061,762
6.8%
6.8%
0
0
32,128
$4.10
Gloucester County, NJ
15,431,128
13.6%
14.2%
0
0
(69,221)
$3.94
Lehigh Valley, PA*
38,301,492
7.2%
9.4%
0
0
1,667,968
$4.03
Montgomery County, PA
32,791,600
10.2%
10.4%
0
0
(73,000)
$4.54
New Castle County, DE
12,769,134
15.8%
17.1%
0
0
345,901
$4.24
Northeast PA***
36,027,536
20.1%
20.4%
0
108,800
686,098
$3.49
Philadelphia County, PA
30,206,240
8.1%
8.7%
394,946
0
674,187
$3.79
401,531,720
11.9%
12.7%
394,946
108,800
5,510,252
$3.69
AVG. Minimum ASKING LEASE RATE ($NNN/PSF/YR)
Inventory
Total Availability Rate
Completions
Bucks County, PA
26,927,561
9.8%
10.2%
Burlington County, NJ
21,564,527
12.4%
Camden, County, NJ
15,394,573
Central PA**
Submarket
Total
Greater Philadelphia Industrial
Under Construction
2011 YTD TOTAL NET ABSORPTION (SF)
Total Vacancy Rate
MARKET STATISTICS - 10,000 TO 100,000 SF Total Availability Rate
Completions
Under Construction
2011 YTD TOTAL NET ABSORPTION (SF)
Bucks County, PA
23,964,650
9.2%
9.5%
0
0
(6,229)
$6.32
Burlington County, NJ
15,871,042
16.6%
17.6%
0
0
(131,866)
$5.88
Camden, County, NJ
17,413,277
14.6%
14.7%
0
0
(204,198)
$5.83
Central PA**
39,616,590
10.5%
11.2%
0
0
163,286
$4.43
Chester County, PA
13,507,055
12.4%
12.9%
0
0
(64,021)
$8.31
Delaware County, PA
10,478,268
11.8%
12.4%
0
0
115,818
$7.73
Gloucester County, NJ
10,113,173
12.6%
13.4%
0
29,838
(23,981)
$5.51
Lehigh Valley, PA*
20,090,022
10.3%
10.9%
0
0
(22,771)
$5.66
Montgomery County, PA
24,060,724
14.5%
14.9%
0
0
11,861
$6.31
New Castle County, DE
16,357,110
12.3%
13.0%
0
0
71,324
$5.02
Northeast PA***
9,063,464
8.3%
8.3%
0
0
128,333
$3.73
Philadelphia County, PA
21,855,283
9.0%
9.4%
0
44,000
42,225
$5.30
222,390,658
11.7%
12.2%
0
73,838
79,781
$5.75
Submarket
Total
* Lehigh and Northampton Counties ** Cumberland, Dauphin, Franklin, Lancaster, Lebanon and York Counties *** Carbon, Lackawanna, Luzerne, Monroe and Schuylkill Counties
Page 2 © 2011, CB Richard Ellis, Inc.
Second Quarter 2011
Inventory
Total Vacancy Rate
PA 7.4% NJ 9.4% DE 8.0%
Economic Conditions
PA
Unemployment Rate - Seasonally Adjusted
Total Vacancy & Net Absorption
Net Absorption ('000's)
Total Vacancy vs. Net Absorption
NJ
Total Vacancy Rate (%)
DE
12.0%
16.0% 14.0%
3,000
Square Feet (000's)
6.0% 4.0%
2,000
10.0%
1,000
8.0% 6.0%
0
4.0% 2.0%
-1,000
0.0%
-2,000 2005
2006
2007
2008
2009
2010
Rental Rates
Direct Asking Lease Rate AverageAverage Direct Asking Lease Rate
0.0% 2Q2009
$3.69 NNN
3Q2009
4Q2009
1Q2010
2Q2010
3Q2010
4Q2010
1Q2011
2Q2011
For the fifth consecutive quarter, the Greater Philadelphia industrial market experienced a decline in total vacancy rate, dropping 40 basis points. Regionally, the vacancy rate currently stands at 11.9%, a 230 basis point decrease from one year ago. Leasing activity in both Burlington County, NJ and Lehigh Valley, PA contributed to the drop in vacancy, experiencing 390 and 250 basis point decreases in vacancy for the quarter, respectively. Although down relative to the prior two quarters, absorption registered in at a healthy 1.89M SF of positive total net absorption. Several larger occupations propelled the Burlington County, NJ submarket to 787,994 SF of positive total net absorption - the county’s largest total in more than eight years – including Boise Cascade Building Materials and American Tire Distributors. Reversing its performance from the first quarter, the Central PA submarket posted 346,205 SF of negative total net absorption, the largest detractor for the quarter. While the rate of absorption has slowed, the Greater Philadelphia industrial market continues to make progress in a positive direction and remains a barometer for the future of the regional commercial real estate market.
New Construction
$4.10
Construction Activity Construction ('000's)
0.11 MSF
8,000 7,000
$4.00
6,000
$3.90 Square Feet (000's)
Per Square Foot Per Year (NNN)
2.0%
2Q 2011
With the economic recovery pushing forward, companies continue to improve their balance sheets and experience record profits while the job market remains a drag on the economy. Although U.S. GDP is back to pre-recession levels, businesses have attained this height of economic expansion with seven million fewer workers, finding new ways to increase productivity and efficiency. As worker output begins to wane, businesses must expand internally – with both capital investments and hiring of new workers – to maintain current levels of production. Consumer spending continues to struggle due in large part to rising fuel prices and lackluster job growth, and may not become a significant driver of economic expansion for another year, or more. Although the economic recovery has endured several unforeseen setbacks, the second half of 2011 looks promising for increased economic expansion and employment growth as both the U.S. GDP and hiring should experience upticks in activity.
Total Vacancy Rate (%)
12.0%
8.0%
Greater Philadelphia Industrial
4,000
10.0% Unemployment Rate (%)
Vacancy 11.9% Absorption 1.89 MSF
$3.80 $3.70
5,000 4,000 3,000 2,000
$3.60
1,000 0
$3.50 2Q2009
3Q2009
4Q2009
1Q2010
2Q2010
3Q2010
4Q2010
1Q2011
2Q2011
2006
2007
2008
2009
2010
2Q 2011
Two buildings delivered during the second quarter: Penn Jersey Paper’s 255,336 SF build-to-suit property at 9355 Blue Grass Road in Philadelphia, PA; and a 139,610 SF warehouse at 600 Packer Ave in Philadelphia, PA, which is 100% occupied by Sysco Food Services. Only one building is currently under construction in the Greater Philadelphia region for 108,800 SF on Enterprise Way in Pittston, PA, marking the lowest deliverable pipeline experienced regionally in the past decade. While tangible construction activity remains extremely sluggish, rumors of construction starts remain on the horizon.
Page 3 © 2011, CB Richard Ellis, Inc.
Second Quarter 2011
The Greater Philadelphia industrial market has some ground to make up before typical rates return to the region. Although vacant space continues to fill up and more tenants are testing the real estate market, asking rental rates dropped for the fourth straight quarter to $3.69 NNN; a full $0.39 off the average asking rate of 2008. The Camden County, NJ submarket contributed the most to the regional decline with a $0.15 drop in the county’s average asking rate, followed closely by Bucks County, PA with $0.12. The only notable positive influence to rental rates came from Philadelphia County, PA with a $0.10 increase to average asking lease rates, backtracking on last quarter’s significant reduction of $0.18. With available quality space continuing to be taken off the market, expect prices to level off here for a quarter or so before beginning the ascent back to normalcy.
2005
Greater Philadelphia Industrial
Top Lease Transactions Size (SF)
Tenant
Address, City, State
314,521
Communications Test Design
200 W. Stewart Hutson Drive, Sadsbury, PA
201,650
Uline
7248 Industrial Boulevard, Allentown, PA
164,880
SPD Electrical Systems
13500 Roosevelt Boulevard, Philadelphia, PA
112,324
American Tire Distributors
111 Ikea Drive, Westampton, NJ
108,160
LKQ Corporation
275 Cross Farm Lane, York, PA
62,400
State of Delaware
220 Lisa Drive, New Castle, DE
Top Sale Transactions
Availability Rate Available space as a percentage of the Base Inventory or Building Sq. Ft Average Asking Lease Rate Average of Asking Lease Rates for each property weighted by the associated Available Space.
Size (SF)
Buyer
Address, City, State
735,640
2301 Corporate Investors LP
2301 W. Hunting Park Avenue, Philadelphia, PA
580,000
Allen Distribution, LP
3041 Schoeneck Road, Lower Macungie, PA
Available Area (Square Feet) Area which is either physically vacant or occupied that is being actively marketed and is available for tenant build-out, including sublease space.
352,500
Baker Properties
955 Oak Hill Road, Mountain Top, PA
Completions Rentable Building Area completed during the period.
330,000
IBC Harrisburg II LP
6 Doughten Road, New Kingstown, PA
248,669
F & P Holding Co
326 June Avenue, Blandon, PA
Base Inventory, Base or Building Square Feet The sum of the Rentable Building Area for all competitive properties. Market Coverage Includes all competitive industrial and flex buildings 10,000 SF and greater in size.
Submarket Map
Net Absorption The change in occupied square feet from one period to the next, including both direct and sublease space. Occupied Square Feet Rentable Building Area less Vacant Space. Under Construction Buildings that have begun construction as evidenced by site excavation or foundation work, and is on-going. Vacancy Rate Vacant space as a percentage of the Base Inventory or Building Sq. Ft. Vacant Area (Square Feet) Existing Building Area which is physically vacant or immediately available, including sublease space.
© 2011 CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis’ Corporate Communications Department or CB Richard Ellis’ research and econometric forecasting unit, CB Richard Ellis—Econometric Advisors. Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.
For more information regarding the MarketView, please contact: Michael L. Compton, Research Manager CB Richard Ellis, Inc. Two Liberty Place, 50 S. 16th Street, Suite 3000 T. 215.561.8900 F. 215.557.6719 [email protected]
Second Quarter 2011
Total Vacancy Rates
11.9%
Direct Lease Rates
$3.69 NNN
Total Net Absorption*
1.89 MSF
Construction
0.11 MSF
Yr.
Qtr.
* The arrows are trend indicators over the specified time period and do not represent a positive or negative value. (e.g., absorption could be negative, but still represent a positive trend over a specified period.)
Hot Topics • POS Tuning, a producer of displays at retail point of sale, opened their new North American headquarters at 173 Edgemoor Road in Wilmington, DE. • The U.S. Department of Transportation awarded Amtrak $450 million to upgrade their Philadelphia to New York City service, which will make it the fastest train in the U.S. • Flower Foods, of Thomasville, GA, purchased Tasty Baking Co. for $175 million with plans to retain all employees and local facilities. • Bloom Energy will build a manufacturing hub in Newark, DE to employ 900 people, with an additional potential of 600 jobs created through co-located suppliers.
The Philadelphia Suburban industrial submarket saw just over 230K SF of positive total net absorption. Leasing and investment activity in this submarket is consistent with tenants and buyers filling available space. Two transactions of note include Communications Test Design, Inc.’s, extension of 314,521 SF at 200 West Stewart Hudson Drive, Chester County, PA; and, Volpe Enterprises’ purchase of 40K SF building at 217 Church Road in North Wales, PA. As available product continues to be absorbed, landlords are less likely to “blend-and-extend” current leases in favor of market rate deals. Although construction activity is at a low point when compared to last quarter and to this time last year, developers are gearing up to begin projects, especially in Central PA. As big box product begins to diminish, the demand for new product will increase. Several speculative projects are in the pipeline that will appeal to users of single and multi-tenant operations. On the positive side, LKQ Corporation leased 108,160 SF at 275 Cross Farm Lane in York County, PA.
In the Northeast PA submarket, companies are honing in on developing real estate strategies as more transactions are taking place and properties trade hands. IBC Holdings purchased 6 Doughten Road, New Kingston, PA, a 330K SF distribution facility and Baker Properties purchased a 352K SF distribution facility at 955 Oak Hill Road, Mountain Top, PA. The Philadelphia County, PA industrial submarket showed positive total net absorption. Penn Jersey Paper significantly contributed to the increased absorption after occupying their brand new 255,336 SF built-to-suit space at 9355 Blue Grass Road, Philadelphia, PA. Additionally, Sysco Food Services recently moved into their newly completed 139K SF facility at 600 Packer Avenue, Philadelphia, PA. In New Castle County, DE, total net absorption ended on the positive side filling 188,141 SF of industrial market space. The State of Delaware contributed to the total positive net absorption in leasing 64K SF of warehouse space at 220 Lisa Drive in New Castle, DE at the Parkway Business Center. In the Southern New Jersey submarket several companies contributed to the positive market absorption. E-Commerce and logistics center provider, CoLinx, signed a lease for 25K SF at 1251 Metropolitan Avenue in Thorofare, NJ. K.S.I Auto Parts leased 41,200 SF at 8295 National Hwy in Pennsauken, NJ. Another notable transaction this quarter involved Mapei Corporation’s acquisition of a 231K SF distribution facility at 2155 High Hill Road, Bridgeport, NJ.
(%) Total VacancyTotal Rate Vacancy Rate 11.9% Direct LeaseLease Rate Rate $3.69 NNN
Vacancy vs. Average Total Vacancy vs. Average DirectTotal Asking Lease Rate Direct Asking Lease Rate
$4.10
16.0% 14.0%
$4.00
12.0% $3.90
10.0%
$3.80
8.0% 6.0%
$3.70
4.0% $3.60
2.0%
Per Square Foot Per Year (NNN)
Change from last
Current
Total Vacancy Rate (%)
Quick Stats
The Lehigh Valley submarket continues to remain strong with declining available space. Posting just over one million square feet of positive total net absorption, the Lehigh Valley submarket continues to outpace neighboring markets with the total availability rate under 10%. Participating in this trending growth, United Bank Card, Inc. will move its current operations and headquarters to 2202 N. Irving Street in Hanover Township, PA. The move will relocate 180 jobs and create 175 jobs once the expansion is complete.
$3.50
0.0% 2Q2009
3Q2009
4Q2009
1Q2010
2Q2010
3Q2010
4Q2010
1Q2011
2Q2011 © 2011, CB Richard Ellis, Inc.
MARKET STATISTICS - 100,000 SF AND LARGER AVG. Minimum ASKING LEASE RATE ($NNN/PSF/YR)
0
0
605,223
$4.03
13.0%
0
0
353,756
$3.69
23.3%
23.3%
0
0
259,574
$3.08
148,681,066
11.7%
12.8%
0
0
1,056,168
$3.51
Chester County, PA
12,375,101
6.3%
6.3%
0
0
(28,530)
$3.77
Delaware County, PA
11,061,762
6.8%
6.8%
0
0
32,128
$4.10
Gloucester County, NJ
15,431,128
13.6%
14.2%
0
0
(69,221)
$3.94
Lehigh Valley, PA*
38,301,492
7.2%
9.4%
0
0
1,667,968
$4.03
Montgomery County, PA
32,791,600
10.2%
10.4%
0
0
(73,000)
$4.54
New Castle County, DE
12,769,134
15.8%
17.1%
0
0
345,901
$4.24
Northeast PA***
36,027,536
20.1%
20.4%
0
108,800
686,098
$3.49
Philadelphia County, PA
30,206,240
8.1%
8.7%
394,946
0
674,187
$3.79
401,531,720
11.9%
12.7%
394,946
108,800
5,510,252
$3.69
AVG. Minimum ASKING LEASE RATE ($NNN/PSF/YR)
Inventory
Total Availability Rate
Completions
Bucks County, PA
26,927,561
9.8%
10.2%
Burlington County, NJ
21,564,527
12.4%
Camden, County, NJ
15,394,573
Central PA**
Submarket
Total
Greater Philadelphia Industrial
Under Construction
2011 YTD TOTAL NET ABSORPTION (SF)
Total Vacancy Rate
MARKET STATISTICS - 10,000 TO 100,000 SF Total Availability Rate
Completions
Under Construction
2011 YTD TOTAL NET ABSORPTION (SF)
Bucks County, PA
23,964,650
9.2%
9.5%
0
0
(6,229)
$6.32
Burlington County, NJ
15,871,042
16.6%
17.6%
0
0
(131,866)
$5.88
Camden, County, NJ
17,413,277
14.6%
14.7%
0
0
(204,198)
$5.83
Central PA**
39,616,590
10.5%
11.2%
0
0
163,286
$4.43
Chester County, PA
13,507,055
12.4%
12.9%
0
0
(64,021)
$8.31
Delaware County, PA
10,478,268
11.8%
12.4%
0
0
115,818
$7.73
Gloucester County, NJ
10,113,173
12.6%
13.4%
0
29,838
(23,981)
$5.51
Lehigh Valley, PA*
20,090,022
10.3%
10.9%
0
0
(22,771)
$5.66
Montgomery County, PA
24,060,724
14.5%
14.9%
0
0
11,861
$6.31
New Castle County, DE
16,357,110
12.3%
13.0%
0
0
71,324
$5.02
Northeast PA***
9,063,464
8.3%
8.3%
0
0
128,333
$3.73
Philadelphia County, PA
21,855,283
9.0%
9.4%
0
44,000
42,225
$5.30
222,390,658
11.7%
12.2%
0
73,838
79,781
$5.75
Submarket
Total
* Lehigh and Northampton Counties ** Cumberland, Dauphin, Franklin, Lancaster, Lebanon and York Counties *** Carbon, Lackawanna, Luzerne, Monroe and Schuylkill Counties
Page 2 © 2011, CB Richard Ellis, Inc.
Second Quarter 2011
Inventory
Total Vacancy Rate
PA 7.4% NJ 9.4% DE 8.0%
Economic Conditions
PA
Unemployment Rate - Seasonally Adjusted
Total Vacancy & Net Absorption
Net Absorption ('000's)
Total Vacancy vs. Net Absorption
NJ
Total Vacancy Rate (%)
DE
12.0%
16.0% 14.0%
3,000
Square Feet (000's)
6.0% 4.0%
2,000
10.0%
1,000
8.0% 6.0%
0
4.0% 2.0%
-1,000
0.0%
-2,000 2005
2006
2007
2008
2009
2010
Rental Rates
Direct Asking Lease Rate AverageAverage Direct Asking Lease Rate
0.0% 2Q2009
$3.69 NNN
3Q2009
4Q2009
1Q2010
2Q2010
3Q2010
4Q2010
1Q2011
2Q2011
For the fifth consecutive quarter, the Greater Philadelphia industrial market experienced a decline in total vacancy rate, dropping 40 basis points. Regionally, the vacancy rate currently stands at 11.9%, a 230 basis point decrease from one year ago. Leasing activity in both Burlington County, NJ and Lehigh Valley, PA contributed to the drop in vacancy, experiencing 390 and 250 basis point decreases in vacancy for the quarter, respectively. Although down relative to the prior two quarters, absorption registered in at a healthy 1.89M SF of positive total net absorption. Several larger occupations propelled the Burlington County, NJ submarket to 787,994 SF of positive total net absorption - the county’s largest total in more than eight years – including Boise Cascade Building Materials and American Tire Distributors. Reversing its performance from the first quarter, the Central PA submarket posted 346,205 SF of negative total net absorption, the largest detractor for the quarter. While the rate of absorption has slowed, the Greater Philadelphia industrial market continues to make progress in a positive direction and remains a barometer for the future of the regional commercial real estate market.
New Construction
$4.10
Construction Activity Construction ('000's)
0.11 MSF
8,000 7,000
$4.00
6,000
$3.90 Square Feet (000's)
Per Square Foot Per Year (NNN)
2.0%
2Q 2011
With the economic recovery pushing forward, companies continue to improve their balance sheets and experience record profits while the job market remains a drag on the economy. Although U.S. GDP is back to pre-recession levels, businesses have attained this height of economic expansion with seven million fewer workers, finding new ways to increase productivity and efficiency. As worker output begins to wane, businesses must expand internally – with both capital investments and hiring of new workers – to maintain current levels of production. Consumer spending continues to struggle due in large part to rising fuel prices and lackluster job growth, and may not become a significant driver of economic expansion for another year, or more. Although the economic recovery has endured several unforeseen setbacks, the second half of 2011 looks promising for increased economic expansion and employment growth as both the U.S. GDP and hiring should experience upticks in activity.
Total Vacancy Rate (%)
12.0%
8.0%
Greater Philadelphia Industrial
4,000
10.0% Unemployment Rate (%)
Vacancy 11.9% Absorption 1.89 MSF
$3.80 $3.70
5,000 4,000 3,000 2,000
$3.60
1,000 0
$3.50 2Q2009
3Q2009
4Q2009
1Q2010
2Q2010
3Q2010
4Q2010
1Q2011
2Q2011
2006
2007
2008
2009
2010
2Q 2011
Two buildings delivered during the second quarter: Penn Jersey Paper’s 255,336 SF build-to-suit property at 9355 Blue Grass Road in Philadelphia, PA; and a 139,610 SF warehouse at 600 Packer Ave in Philadelphia, PA, which is 100% occupied by Sysco Food Services. Only one building is currently under construction in the Greater Philadelphia region for 108,800 SF on Enterprise Way in Pittston, PA, marking the lowest deliverable pipeline experienced regionally in the past decade. While tangible construction activity remains extremely sluggish, rumors of construction starts remain on the horizon.
Page 3 © 2011, CB Richard Ellis, Inc.
Second Quarter 2011
The Greater Philadelphia industrial market has some ground to make up before typical rates return to the region. Although vacant space continues to fill up and more tenants are testing the real estate market, asking rental rates dropped for the fourth straight quarter to $3.69 NNN; a full $0.39 off the average asking rate of 2008. The Camden County, NJ submarket contributed the most to the regional decline with a $0.15 drop in the county’s average asking rate, followed closely by Bucks County, PA with $0.12. The only notable positive influence to rental rates came from Philadelphia County, PA with a $0.10 increase to average asking lease rates, backtracking on last quarter’s significant reduction of $0.18. With available quality space continuing to be taken off the market, expect prices to level off here for a quarter or so before beginning the ascent back to normalcy.
2005
Greater Philadelphia Industrial
Top Lease Transactions Size (SF)
Tenant
Address, City, State
314,521
Communications Test Design
200 W. Stewart Hutson Drive, Sadsbury, PA
201,650
Uline
7248 Industrial Boulevard, Allentown, PA
164,880
SPD Electrical Systems
13500 Roosevelt Boulevard, Philadelphia, PA
112,324
American Tire Distributors
111 Ikea Drive, Westampton, NJ
108,160
LKQ Corporation
275 Cross Farm Lane, York, PA
62,400
State of Delaware
220 Lisa Drive, New Castle, DE
Top Sale Transactions
Availability Rate Available space as a percentage of the Base Inventory or Building Sq. Ft Average Asking Lease Rate Average of Asking Lease Rates for each property weighted by the associated Available Space.
Size (SF)
Buyer
Address, City, State
735,640
2301 Corporate Investors LP
2301 W. Hunting Park Avenue, Philadelphia, PA
580,000
Allen Distribution, LP
3041 Schoeneck Road, Lower Macungie, PA
Available Area (Square Feet) Area which is either physically vacant or occupied that is being actively marketed and is available for tenant build-out, including sublease space.
352,500
Baker Properties
955 Oak Hill Road, Mountain Top, PA
Completions Rentable Building Area completed during the period.
330,000
IBC Harrisburg II LP
6 Doughten Road, New Kingstown, PA
248,669
F & P Holding Co
326 June Avenue, Blandon, PA
Base Inventory, Base or Building Square Feet The sum of the Rentable Building Area for all competitive properties. Market Coverage Includes all competitive industrial and flex buildings 10,000 SF and greater in size.
Submarket Map
Net Absorption The change in occupied square feet from one period to the next, including both direct and sublease space. Occupied Square Feet Rentable Building Area less Vacant Space. Under Construction Buildings that have begun construction as evidenced by site excavation or foundation work, and is on-going. Vacancy Rate Vacant space as a percentage of the Base Inventory or Building Sq. Ft. Vacant Area (Square Feet) Existing Building Area which is physically vacant or immediately available, including sublease space.
© 2011 CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis’ Corporate Communications Department or CB Richard Ellis’ research and econometric forecasting unit, CB Richard Ellis—Econometric Advisors. Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.
For more information regarding the MarketView, please contact: Michael L. Compton, Research Manager CB Richard Ellis, Inc. Two Liberty Place, 50 S. 16th Street, Suite 3000 T. 215.561.8900 F. 215.557.6719 [email protected]
