Philadelphia Industrial Sales Boom, Deliveries Retreat

Philadelphia’s industrial market saw investment activity strengthen through the first five months of the year, even as development trends moved in different directions. Sales volume more than doubled from the same period last year, while the construction pipeline expanded substantially.

Industrial deliveries, however, fell well below the previous year’s total following a period of elevated completions. Vacancy reached 9 percent, slightly above the national rate, as rents continued to rise, according to Yardi Matrix data.

Construction pipeline expands from last year

As of the end of May, Philadelphia had nearly 8.7 million square feet of industrial space under construction across 20 properties. The pipeline represented 1.8 percent of total stock, matching the national average.

Phoenix had the largest pipeline relative to existing inventory at 5.5 percent, followed by Dallas at 3.1 percent and Atlanta at 2.4 percent. Chicago and Kansas City each had 1.1 percent of stock under construction.

Philadelphia’s pipeline was more than three times larger than during the same period last year, when five facilities totaling 2.7 million square feet were under construction.

Recently, Provident Industrial broke ground on a 257,040-square-foot building at 300 Keystone Drive in Limerick, Pa. The project marks the company’s first development in the Northeast and is scheduled for delivery in June 2027. The site is along the Route 422 corridor northwest of Philadelphia.

Pace of completions slows sharply

Philadelphia developers brought online 1.1 million square feet of industrial space across six properties year-to-date through May, according to Yardi Matrix. Completions represented 0.2 percent of total stock.

Dallas led the comparison group with 12.4 million square feet delivered, while Kansas City completed 976,920 square feet during the same period.

The metro’s delivery volume declined considerably from a year earlier, when 17 properties totaling 7.5 million square feet came online. Those completions represented 1.6 percent of stock, compared with the 0.6 percent national average at the time.

Investment volume more than doubles

Philadelphia’s industrial sales volume reached $960 million year-to-date through May, according to Yardi Matrix. A total of 58 properties encompassing 6 million square feet changed hands across the metro.

Sales volume more than doubled from the same period last year, when Philadelphia recorded $436.5 million in transactions. Average pricing also increased from $126.86 per square foot during that period.

Industrial properties traded at an average of $159 per square foot. The Inland Empire recorded a higher average of $172 per square foot, followed by Phoenix at $169 per square foot. Kansas City posted a considerably lower average of $79 per square foot.

Bridge Investment Group acquired a 345,000-square-foot industrial property at 4300 S. 26th St. in Philadelphia for $87 million, or approximately $251 per square foot, according to Yardi Matrix. Prologis sold the asset and will remain its property manager. The manufacturing facility came online in 2009 on a 24-acre site near Interstate 95. The property is approximately 5 miles from both Philadelphia International Airport and downtown Philadelphia.

Vacancy edges above the national rate

Philadelphia’s industrial vacancy rate stood at 9 percent as of the end of May, slightly above the 8.8 percent national average. Chicago posted a higher rate of 9.9 percent, while Kansas City recorded a lower vacancy rate of 6.1 percent.

Average in-place rents in Philadelphia reached $8.77 per square foot, up 4.3 percent over the previous 12 months. Leases signed during that period averaged $10.03 per square foot.

Logistics Property Co. signed a warehouse service provider to occupy the entire 973,200-square-foot building at South Penn Logistics Center in Morrisville, Pa., a Philadelphia suburb. The company did not disclose the tenant’s name.