Cracks Emerge in Philadelphia’s Industrial Market

Philadelphia industrial brokers and investors are noticeably less rattled by the coronavirus’ economic shock than their counterparts who specialize in the office or retail sectors. And that is with good reason. 

The local industrial market is entering the current crisis with tighter vacancies than those achieved even during the best years of economic boom of the mid-2000s and the late 1990s. Meanwhile, new tenant demand for logistics space in particular has surged past demand growth in the office and retail markets over the past four years. 

This all comes as retailers and e-commerce platforms, including Amazon, increasingly compete for faster home delivery options. To facilitate faster deliveries, these firms have been storing more goods in local distribution centers that are closer to population centers. Now that fears of contracting the coronavirus are driving more consumers to order goods for home delivery rather than venturing out to go shopping, these secular shifts benefiting distribution centers are likely to accelerate.

In the short term however, Philly’s industrial market is also staring down one of the region’s worst economic downturns in decades.

In April alone, the Bureau of Labor Statistics’ warehousing and storage sector shed almost 15,000 jobs (or 9% of its total staff) across Pennsylvania and New Jersey. Meanwhile, CoStar data shows that at the national level, industrial landlords and brokers have been consistently pulling down advertised rents on their space listings since late February. 

Some of the most at-risk properties are those housing distribution operations of high-risk retailers, such as Sears, Kmart and Office Depot, which have struggled to adapt to the consumer shift to online shopping. Office Depot, for example, has already announced plans to close its 185,000-square-foot facility in Lower Bucks County. 

But with the overall market expected to remain tight even after vacancies rise in 2020, many at-risk properties will likely present viable targets for value-add investors. 

CoStar’s latest market overview video covers these trends, highlighting near-term risks across the market, many of which will likely present long-term opportunities. 

*Article courtesy of CoStar News

For more information about Philly Industrial space for sale or lease in Philadelphia or about any other Philadelphia properties for sale or lease, please contact WCRE at 215-799-6900.

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