Absorption

Construction

Vacancy Rate

NEW SUPPLY, VACANCY AND ABSORPTION

Arrows compare current period to the previous period and forecast the next period.

MARKET INDICATORSRelative to prior period

PA/NJ/DEQ2 2020

PA/NJ/DEQ2 2021*

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE

*Projected

AVERAGE ASKING RENTS (NNN) Average Phila PA Suburbs South Jersey New Castle Lehigh Northeast PA S I-81 I-83

Research & Forecast Report

EASTERN PENNSYLVANIA SOUTHERN NEW JERSEYDELAWARE

2020 Year-End | Industrial

MSF VACANCY

Regional Industrial MarketKey Trends > The overall regional vacancy rate increased from 6.0% to 6.4% during the first half of 2020.

> Year-to-date absorption totaled over 23.4 million square feet, more than tripling 2019’s mid-year total.

> Asking rents rose by an additional 3.0% during the last two quarters to $5.60 per square foot or a 7.0% year-over-year increase.

> The 17.1 million square feet of deliveries in the second half of the year pushed annual total past 2016’s high-water mark.

> Investment demand remained extremely strong, boosted by an increase in sale-leaseback transactions.

The regional industrial market had an extremely strong year. The vacancy rate increased during the last two quarters, mainly due to the completion of 12.5 million square feet of speculative construction. However, one-third of this new supply has been leased. The supply of quality legacy space has grown increasingly tight, with few quality options available for requirements in most size ranges, particularly for purchase.

E-commerce has been a major driver of demand, with both fully online companies and mass merchandising companies such as Walmart expanding their e-commerce platforms. Amazon continued to lease new construction and existing blocks over 100,000 square feet.

With the influx of new requirements in the market, there has also been an increase in demand for more highly-automated facilities and for specialized features such as 50’ plus to even 70’ plus clear heights, temperature-controlled space, flatbed loading, and particularly excess parking for employees, trailers and delivery vehicles.

Developer interest in the Philadelphia market remains very strong, particularly for sites along the I-95 and I-295 corridors. Over 62% of the 21.6 million square feet under construction is speculative and at least 10 million square feet of additional spec development may commence over the next two quarters.

The two mega-development sites, Hilco Redevelopment Partners’ PES site in Philadelphia and NorthPoint Development’s KIPC complex in Bucks County, will be two of the largest industrial developments on the East Coast.

$3.00

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

$7.00

16 17 18 19 20

0%

2%

4%

6%

8%

10%

12%

0

5

10

15

20

25

30

16 17 18 19 20

2 Research & Forecast Report | 2020 Year-End | Greater Philadelphia Region | Colliers International

NOTABLE SALESPROPERTY ADDRESS LOCATION BUYER SIZE SF SALE PRICE / SF TYPE

Whitesell Light Industrial Porfolio (NJ and PA) multiple Camber Real Estate Partners 1,242,667 $75.48 Investor

3419 Ritner Highway Southern I-81/I-83 Exeter Property Group 1,215,240 $69.95 Investor

Twinbridge Center Southern New Jersey Twinbridge Center 1,164,939 $71.46 Investor

1900 River Road Southern New Jersey Clarion Partners 1,048,631 $105.38 Investor

140 Industrial Drive Northeast PA Ball Corporation 1,078,200 $89.04 User

270 Daniels Way Southern New Jersey ProLogis 721,000 $146.67 Investor

2750 Morris Road Montgomery County Velocity Venture Partners 667,000 $49.48 Investor

8001 Industrial Boulevard Lehigh County NFI 596,247 $105.14 Investor

1180 Church Road Montgomery County Velocity Venture Partners 452,323 $43.11 Investor

14400 McNulty Road Philadelphia County Ivy Realty Services 445,000 $44.94 Investor

3100 N. Mill Road Southern New Jersey High Street Logistics Properties 432,000 $53.70 Investor

1 Technology Drive Southern New Jersey Eaton Vance Investment Managers 430,000 $121.05 Investor

101 Gordon Drive Chester County Angelo Gordon 423,217 $112.29 Investor

151 Benigno Boulevard Southern New Jersey Maguire Hayden Real Estate Co. 381,980 $60.47 Investor

2320 Newlins Mill Road Lehigh County Exeter Property Group 358,375 $111.61 Investor

1560 Joel Drive Southern I-81/I-83 APR Supply 350,000 $32.86 User

Keystone Industrial Park portfolio Bucks County Taurus Investment Holdings 304,419 $96.08 Investor

Runnemede Corporate Center Southern New Jersey Faropoint Investments 301,366 $97.05 Investor

Recent Transactions Q3 and Q4 2020LEASE ACTIVITY PROPERTY ADDRESS LOCATION TENANT SIZE SF TYPE

2281 United Drive Southern I-81/I-83 Wal-Mart 1,800,000 New

780 S. Dupont Highway New Castle County Amazon 1,332,144 New-BTS

Tri-State Distribution Center Salem County Amazon 1,250,000 New-BTS

201 Cramer Road Southern I-81/I-83 Lowe's Home Centers, Inc. 1,100,846 New

951 Centerville Road Southern I-81/I-83 FedEx 900,000 New

4255 North Valley Drive Lehigh Valley UNFI 812,210 New

22 Stauffer Industrial Park Drive Northeast PA Kane Warehousing 711,200 New-leaseback

Mansfield Logistics Park Building 2 Burlington County Elogistic 710,368 New

1625 Heilmandale Road Southern I-81/I-83 Wal-Mart 600,000 New

8001 Industrial Boulevard Lehigh Valley Bridgestone Americas 596,247 New-leaseback

201 Old York Road Southern New Jersey Goplus 569,145 New

7058 Snowdrift Road Lehigh Valley Allen Distribution 540,000 New

4240 North Valley Drive Lehigh Valley UNFI 514,765 New

1 Technology Drive Southern New Jersey TechData Corporation 430,000 New-leaseback

1 Geoffrey Drive Bucks County Amazon 415,000 New

151 Benigno Boulevard Southern New Jersey Amoroso's Bakery 381,980 New-leaseback

8600 River Road Camden County Utopia Fulfillment 347,000 New

9801 Blue Grass Road Philadelphia County TJX 282,000 New-BTS

8 Campus Drive Southern New Jersey Amazon 253,500 New

1179 Florence Columbus Road Southern New Jersey Aosom 249,000 New

9 Gateway Boulevard Southern New Jersey Premier Packaging 213,900 New

3025 Meetinghouse Road Philadelphia County Amazon 207,370 New

115 Shady Lane Southern I-81/I-83 Mary Kay 202,500 New

2650 Oldmans Creek Road Gloucester County Ginsey Industries 184,072 New

3 Research & Forecast Report | 2020 Year-End | Greater Philadelphia Region | Colliers International

INDUSTRIAL MARKET

SUBMARKET INVENTORYDIRECT

VACANTSUBLETVACANT

TOTALVACANT

VACANCYRATE

YTD NET ABSORPTION

COMPLETIONSYTD

UNDER CONSTRUCTION

AVG. ASKINGRENT NNN

Philadelphia County 77,199,854 3,460,987 19,659 3,480,646 4.5% 1,295,582 801,862 100,000 $6.19

Bucks County 54,254,020 1,869,268 2,400 1,871,668 3.4% 682,467 175,055 276,650 $6.84

Chester County 24,207,145 1,234,286 185,292 1,419,578 5.9% (72,977) 183,217 34,170 $8.88

Delaware County 20,365,166 803,155 69,128 872,283 4.3% 361,344 128,000 484,000 $7.12

Montgomery County 53,761,517 1,863,685 247,616 2,111,301 3.9% 942,986 283,906 483,590 $7.31

SUBURBAN TOTAL 152,587,848 5,770,394 504,436 6,274,830 4.1% 1,913,820 770,178 1,278,410 $7.50

Southern NJ 125,131,257 4,835,308 434,250 5,269,558 4.2% 5,261,351 3,958,990 4,808,747 $5.55

Northern Delaware 26,121,451 1,272,718 113,387 1,386,105 5.3% 1,266,261 1,191,450 5,927,721 $6.56

Lehigh Valley 99,869,526 6,190,369 586,076 6,776,445 6.8% 3,919,439 7,010,943 3,149,509 $6.85

Northeast PA 102,526,486 10,035,422 223,587 10,259,009 10.0% 6,282,397 7,382,720 1,309,352 $4.26

S I-81 / N I-83 134,143,060 11,921,299 371,838 12,293,137 9.2% 3,512,980 3,674,157 4,989,774 $4.81

MARKET TOTAL 717,579,482 43,486,497 2,253,233 45,739,730 6.4% 23,451,830 24,790,300 21,563,513 $5.60

Market Comparison Update

Inventory: Flex, warehouse and manufacturing buildings over 20,000 SF or over 50,000 SF.

Vacant Space: All spaces that are physically vacant, excluding projects under construction or substantial rehabilitation.

Net Absorption: The difference in physically occupied space within a given time period for a particular market.

Vacancy Rate: Total vacant space divided by the total inventory.

Average Asking Rent: Weighted average rent per SF, triple net.

Under Construction: Counted when steel is up, not at the commencement of site work.

0

5

10

15

20

25

30

11 12 13 14 15 16 17 18 19 20

MSF

Speculative Build-to-Suit

DEFINITIONS

Construction History

Philadelphia County Philadelphia County began to regain its standing as a regional industrial powerhouse during 2020. The vacancy rate dropped to 4.5% and absorption hit a historical high of 1.7 million square feet. Developer, investor and occupier interest continues to increase.

Crow Holdings is developing an infill location at 2900 Grant Avenue. Bridge Development acquired 68.5 acres on Richmond Street for a 733,800-square-foot development, and occupiers Baldor Foods and TJX announced plans for build-to-suits.

Suburban PennsylvaniaThe suburban counties rebounded during the second half of the year. The overall vacancy decreased to 4.1%, and 60% of the annual absorption was in the 4th quarter. While this is a positive trend, and largely driven by local companies expanding in the market, in Bucks and Montgomery counties, where vacancy had dropped below 4.0%, the late 2020 uptick in activity has depleted the supply of space options in the 50,000 to 100,000-square-foot range.

Build-to-suit projects for Mygrant Glass, Bimbo, Amazon and Myoderm were underway. Nappen completed a 125,000 square foot building in Quakertown and has 213,590 square feet underway in Hatfield. Trammell Crow broke ground on the two-building Springbrooke Trade Center in Delaware County. The first building at Core5 Logistics Center at Park 31 near the Lansdale Turnpike interchange are set to commence in the first quarter. NorthPoint Development plans to begin construction on the first 3.0 million square feet at the newly acquired KIPC site in Fairless Hills early in the second quarter.

Southern New JerseyThe overall vacancy rate for the 5 counties increased slightly since mid-year to 4.2%. Over 40% of the 3.9 million square feet of spec construction completed in the 3rd and 4th quarters was leased before or shortly after completion. Two additional full building leases were pending.

Requirements coming down the Turnpike and landing in Burlington County continue to push up asking rents as each new lease is signed.

The successful absorption of new construction and the availability of greenfield and brownfield sites along the Turnpike, I-295 as well as peripheral infill areas has resulted in an imposing development pipeline. An estimated 36 million square feet of new construction projects are currently planned, mainly in Burlington, Gloucester and Salem counties.

New Castle County, DE

New Castle County’s vacancy ticked up slightly in fourth quarter to 5.3% but has trended downward overall since 2019. New Castle County is an example of a market that is diverging into two separate markets. There is the stable if not stagnant portion in the established parks and the emerging bulk-requirement-chasing portion along the Route 13 and I-95 corridors. Amazon has 5.1 million square feet under construction.

Solo Cup’s occupancy of its new 1.0-million-square-foot facility at Delaware Logistics Center in the 3rd quarter helped to boost annual absorption higher than in the three previous years combined.

Lehigh Valley, PAVacancy in the Lehigh Valley increased to 6.8% due to the delivery of spec construction. However, the pipeline of requirements remains robust. Smaller format speculative construction has boosted vacancy in the 250,000 to 500,000 and 100,000 to 250,000 square foot size ranges, but the vacancy rate for buildings under 100,000 square feet is in the 2-3% range.

The Valley’s manufacturing sector continues to grow. A.P. Deauville is relocating from Central New Jersey, Victualic opened a new 400,000 square foot facility, and other resident companies such as EcoTech Marine expanded.

Northeast PennsylvaniaThe delivery of 2.8 million square feet of spec space, including two 1.0 MSF plus buildings, in the 4th quarter, pushed vacancy up to 10%. Even with this 4th quarter vacancy increase, Northeast PA had the highest annual absorption in the region in 2020. Build-to-suits for Chewy.com and a large user purchase by Ball Corporation added over 2.0 million square feet of occupancy. CANPACK, which acquired the former Cinram property earlier in 2020, announced plans to build a new 908,000-square-foot aluminum can manufacturing plant on the site.

Southern I-81 and I-83 Corridors, PA Vacancy along the Southern I-81 and I-83 corridors increased from 7.6% to 9.2% during the last two quarters of 2020. Demand has remained strong for new construction, but 60% of the market vacancy is in previous generation buildings.

As the core central exits of I-81 have become built out, and there has been increasing push back on a municipal level, new development shifted to I-83 in York County, I-81 south of Shippensburg, north into Lebanon County as well as sites near I-283, U.S. Routes 322 and 422 in Dauphin and Lebanon counties.

Submarket Reviews

4 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International

Colliers InternationalPhiladelphia HQ

Ten Penn Center1801 Market Street, Suite 500

Philadelphia, Pennsylvania, 19103+1 215 925 4600

Allentown, PA TEL +1 610 770 3600

Conshohocken, PA TEL +1 610 684 1850

Harrisburg, PA TEL +1 717 730 3752

Wilmington, DE TEL +1 302 425 4000

Mount Laurel, NJ TEL +1 856 234 9300

Copyright © 2020 Colliers International.The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

443 offices in 68 countries on

6 continentsUnited States: 159

Canada: 48 Latin America: 20

Asia: 45 EMEA: 114

ANZ: 54

$3.5 billion in annual revenue

2.0 billion sf under management

18,000+ professionals and staff