Positive absorption in Philadelphia’s industrial market, which includes South Jersey, contributed to vacancy declines for the year, according to Cushman & Wakefield’s fourth-quarter 2017 Industrial MarketBeat study.
“The Philadelphia industrial market’s overall vacancy rate declined to 4 percent in the fourth quarter of 2017, down 20 basis points from the fourth quarter of 2016,” said Jared Jacobs, Cushman & Wakefield’s research manager. “While overall net asking rental rates for warehouse and distribution space in the Philadelphia (metro area) declined by 2.8 percent year-over-year, rates in the southern New Jersey industrial market increased by 5.3 percent, to $4.50 per square foot in 2017.”
The study found that South Jersey’s industrial market accounted for 65.8 percent of 4.9 million total square feet absorbed, resulting in a positive net absorption for the year. New construction, it found, is also highly concentrated in South Jersey, where 3.1 million square feet accounted for 97.1 percent of the market’s total construction for 2017.
“Overall market fundamentals have remained strong throughout the southern New Jersey industrial market as the developer community has been disciplined relative to the timing of their projects,” said John Gartland, managing director of the Industrial Brokerage Group. “Strong labor statistics, PILOT programs and competitive pricing for functional Class A product have created a very attractive environment for tenants looking to service the Pennsylvania, New Jersey and New York markets.”
For the fifth year in a row, the Burlington County submarket was on top in leasing activity, the study suggested. The flurry of activity, it found, was due to tightened market conditions to the north and the expansion of the New Jersey Turnpike between exits 6 and 8A. Tenants, the firm said, have been relocating to this area from as far north as Secaucus. B&H Photo Video leased 577,200 square feet at a newly-constructed building in Florence; Medline Industries Inc. leased 300,000 square feet in Westampton; and PFG Customized Distribution renewed 127,340 square feet in Westampton, Cushman & Wakefield said.
Amazon was the largest tenant lease of the year, taking an entire 652,411-square-foot building under construction in West Deptford in Gloucester County, the firm reported. This market saw robust activity, the study found, with new tenants including Kenco Group Inc. leasing 401,008 square feet in Logan Township, and LKQ Corp. leasing 183,570 square feet in Thorofare.
Asking rents, the study found, inclined slightly, with projections trending upward for the South Jersey industrial market for 2018. Vacancy is expected to remain stable, with 76.3 percent of the 2 million square feet of expected construction scheduled for delivery this year has been preleased.