Leasing Keeping Pace With Philadelphia’s Distribution Center Building Boom

With a fresh round of stimulus checks hitting households’ bank accounts, retail spending surging and consumers still gravitating towards online shopping as a means of social distancing, the economic backdrop could hardly be more supportive of the burgeoning distribution sector.

Even as the volume of distribution centers under construction has skyrocketed by 70% in the Philadelphia area during the past six months, leasing has largely kept pace.

Just in the past 12 months, tenants such as Amazon, Target, Elogistic and DNA Motoring have leased more than 13 million square feet worth of 21st century distribution space in the Philadelphia metropolitan area alone.

In that light, it’s easy to see how the market’s current tally of 10 million square feet worth of unleased, modern distribution centers, which is mostly made up of properties currently under construction, could be nearly fully leased less than 18 months from now.

But supply risk is not completely out of the picture. Massive, long-term redevelopments projects continue to push through the planning stages.

By this summer, NorthPoint is planning to start the first phase of its redevelopment of the former U.S. Steel Plant in Lower Bucks County, which could eventually be home to 15 million square feet of new industrial space. Hilco is also planning a 15 million-square-foot industrial campus to eventually take shape at the site of the former SEC Oil Refinery in Southwest Philadelphia.

Investors and developers will need to keep a watchful eye on construction tallies over the next several months. As the pandemic abates, households may likely shift spending away from e-commerce and back towards in-person services, such as restaurants and entertainment, which could cause distribution leasing to soften, even as more speculative construction accumulates.

But a portion of the pandemic-induced shift to e-commerce spending and at-home delivery will likely be permanent. For now, developers can’t seem to build distribution centers fast enough, and the Philadelphia industrial market’s stellar performance looks set to continue well into 2021.

*Article courtesy of CoStar

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