The document summarizes industrial real estate market trends in the Philadelphia area in Q3 2016. It finds that the overall vacancy rate declined from the previous year to 4.9% as net absorption increased significantly. Asking rental rates also increased slightly. Looking ahead, nearly 1 million square feet of new speculative construction in Southern New Jersey is projected to be completed next quarter without preleasing, which will likely cause vacancy to rise in that submarket.

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Philadelphia
Industrial Q3 2016
MARKETBEAT
Economic Indicators
Market Indicators (Overall, All Property Types)
Overall Net Absorption/Overall Asking Rent
4-QTR TRAILING AVERAGE
Overall Vacancy
Q3 15 Q3 16
12-Month
Forecast
Philadelphia Employment 2,828M 2,883M
Philadelphia Unemployment 5.0% 5.2%
U.S. Unemployment 5.2% 4.9%
Q3 15 Q3 16
12-Month
Forecast
Vacancy 5.8% 4.9%
Net Absorption (sf) 3.7M 6.4M
Under Construction (sf) 5.2M 3.1M
Average Asking Rent* $4.76 $4.65
*Rental rates reflect net asking $psf/year
Economy
The Philadelphia Metropolitan Area’s (MSA) unemployment rate
increased to 5.2% in the third quarter of 2016, an increase by 20
basis points (BPS) year-over-year. Total nonfarm employment
increased by 1.9% since this point last year. Philadelphia’s
manufacturing index increased to a reading of 12.8 in September
2016, the highest since February of 2015.
Market Overview
The Philadelphia industrial market’s overall vacancy rate
declined to 4.9% in the third quarter of 2016, down 90 BPS from
the third quarter of 2015. Overall absorption climbed to positive
6.4 million square feet (MSF) this quarter, an increase of 73.0%
from this point last year. Key contributors to the rise in absorption
were the construction completions of the 1.3-MSF build-to-suit
for W.W. Grainger at 400 Bordentown Hedding Road in
Bordentown, NJ and the 613,920-square foot (-SF) building at
309 Cedar Lane in Florence, NJ leased by Amazon. Direct
asking rental rates for warehouse and distribution space
increased to $4.28 per square foot (PSF) this quarter, up 0.9%
from the third quarter of 2015.
Year-to-date leasing activity is at 8.4 MSF, up 13.5% from this
point last year. The largest lease of the third quarter was signed
by Continental Tire, leasing 740,880 SF at 3000 AM Drive in
Quakertown, PA. Seven of the top 10 largest leases signed in
the Philadelphia industrial market this quarter were in the
Southern New Jersey market. In Burlington County, notable
leases included, the Camuto Group taking 682,708 SF at 32
Springside Road in Westhampton, Burlington Coat Factory
leasing 510,566 SF at 400 Richards Road in Burlington, Quality
Packaging Specialists inking a 377,440-SF deal at 2020 Route
130 in Florence and HD Supply Holdings, Inc. leasing 172,173
SF at 1640 River Road in Burlington. In the Northern Delaware
industrial market, Zenith Home Corp. renewed for 485,987 SF at
400 Lukens Drive in New Castle.
Outlook
Almost 1.0 MSF of new speculative (spec) construction is
scheduled to deliver in Southern New Jersey next quarter, none
of which is preleased, which will cause a rise in vacancy. Asking
rental rates for warehouse and distribution space are projected to
increase by 2.5% by year-end 2016, compared to year-end 2015
numbers. Absorption is expected to push further northward, with
1.2 MSF scheduled to absorb in the fourth quarter, which would
top the previous market high of 6.8 MSF of positive absorption in
2005.
PHILADELPHIA INDUSTRIAL
$4.30
$4.40
$4.50
$4.60
$4.70
$4.80
$4.90
$5.00
$5.10
$5.20
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2011 2012 2013 2014 2015 Q3 16
Net Absorption, (thousands) Asking Rent, $ PSF
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2011 2012 2013 2014 2015 Q3 16
Historical Average = 5.9%

2. MARKETBEAT
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Copyright © 2016 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple
sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or
representations as to its accuracy.
Philadelphia
Industrial Q3 2016
SUBMARKET
TOTAL
BLDGS
INVENTORY
(SF)
YTD
LEASING
ACTIVITY
(SF)
YTD USER
SALES
ACTIVITY
(SF)
OVERALL
VACANCY
RATE
YTD
OVERALL NET
ABSORPTION
(SF)
UNDER
CNSTR
(SF)
YTD
CONSTR
COMPLETIONS
(SF)
OVERALL
WEIGHTED
AVG.
NET RENT
(MF)
OVERALL
WEIGHTED
AVG.
NET RENT
(OS)
OVERALL
WEIGHTED
AVG.
NET RENT
(W/D)
Philadelphia County** 715 58,114,585 370,869 206,000 7.9% 103,599 0 145,000 $2.80 $8.03 $3.63
Lower Bucks County 587 38,270,680 528,410 325,907 4.7% 275,900 0 0 $6.28 $10.62 $3.87
Upper Bucks County 392 19,630,240 941,948 306,755 2.1% 745,704 12,000 31,000 N/A $10.53 $5.35
Montgomery County 754 46,218,991 1,287,312 143,889 4.2% 202,838 200,000 331,333 $6.05 $9.56 $6.41
Chester County 478 26,672,297 309,610 373,935 1.8% 135,944 53,040 0 N/A $7.91 $6.75
Delaware County 258 15,266,812 255,319 53,100 4.8% 239,813 0 247,452 $4.50 $6.21 $4.96
SUBURBAN PHILADELPHIA 2,469 146,059,020 3,322,599 1,203,586 3.7% 1,600,199 265,040 609,785 $6.04 $8.67 $4.61
Burlington County 392 35,783,967 3,926,788 136,333 7.3% 4,015,206 1,850,348 3,131,917 N/A $6.93 $4.18
Camden County 456 27,106,816 313,781 366,265 2.5% 161,748 600,000 0 $4.07 $9.46 $4.50
Gloucester County 224 22,175,807 440,376 145,275 4.1% 508,206 393,120 0 N/A $6.28 $4.62
SOUTHERN NEW JERSEY 1,072 85,066,590 4,680,945 647,873 5.0% 4,685,160 2,843,468 3,131,917 $4.07 $6.97 $4.30
Northern Delaware*** 355 26,067,916 811,650 232,000 9.3% 84,071 0 26,600 $6.01 $6.42 $4.86
PHILADELPHIA MSA TOTALS 4,256 289,240,195 8,374,413 2,057,459 4.9% 6,388,958 3,108,508 3,886,702 $3.75 $7.98 $4.24
*Rental rates reflect asking $psf/year **Philadelphia County not included in Suburban Philadelphia Totals MF = Manufacturing OS = Office Service/Flex W/D = Warehouse/Distribution
*** Northern Delaware market not included in Philadelphia MSA Totals
Key Lease Transactions Q3 2016
PROPERTY SF TENANT PROPERTY TYPE SUBMARKET
3000 AM Drive 740,880 Continental Tire Warehouse/Distribution Upper Bucks County
32 Springside Road 682,708 Camuto Group Warehouse/Distribution Burlington County
400 Richards Run 510,566 Burlington Coat Factory Warehouse/Distribution Burlington County
Key Sales Transactions Q3 2016
PROPERTY SF SELLER/BUYER PROPERTY TYPE PRICE / $PSF SUBMARKET
400 Lukens Drive 485,987
Zenith Home Corp. / STAG
Industrial, Inc.
Warehouse/Distribution $27,500,000 / $57 New Castle County
Keystone Industrial Portfolio Sale 475,910 GLP / Carson Companies Warehouse/Distribution $26,085,000 / $55 Lower Bucks County
Key Construction Completions Q3 2016
PROPERTY SF SUBMARKET MAJOR TENANT PROPERTY TYPE COMPLETION DATE
400 Bordentown Hedding Road 1,300,000 Burlington County W.W. Grainger Warehouse/Distribution 3Q 2016
309 Cedar Lane 613,920 Burlington County Amazon Warehouse/Distribution 3Q 2016
Key Projects Under Construction
PROPERTY SF SUBMARKET MAJOR TENANT PROPERTY TYPE COMPLETION DATE
32 Springside Road 682,708 Burlington County Camuto Group Warehouse/Distribution 1Q 2017
Holtec Technology Campus 600,000 Camden County Holtec International Manufacturing 4Q 2017
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