Following a strong 2016 for warehouse development in the Greater Philadelphia region, demand for big-box projects should continue to grow, according to a fourth-quarter report from real estate firm CBRE Group Inc.
CBRE said the region, which includes Central Pennsylvania, finished with a record for completed space last year with 21.3 million square feet.
Although lease rates are rising, the outlook for 2017 remains “favorable,” according to CBRE researchers, who cite low vacancy rates. The average rent in Central Pennsylvania in the fourth quarter was $4.36 per square foot, up from $4.31 in the third quarter.
Another 14.3 million square feet of industrial space is currently under construction, including about 4.1 million in the midstate and 6.2 million in the Lehigh Valley market.
Industrial real estate refers primarily to warehouse and distribution facilities.
Last year,about 19.7 million square feet of industrial space was occupied in the Greater Philadelphia region, including 11.3 million square feet in Central Pennsylvania and the Lehigh Valley.
Central Pennsylvania finished 2016 with 7 million square feet of new industrial space, according to CBRE.
Cumberland County had the most industrial space delivered with five projects totaling 2.9 million square feet. The largest project was the new warehouse in Prologis Park in the Carlisle area at 1 million square feet.
In York County, by comparison, there were three projects totaling about 2.4 million square feet. The largest project was the Trade Center 83 in East Manchester Township at 1.2 million square feet. In Lebanon County, three projects totaled about 1.8 million square feet.
“While every region in the market realized significant quarterly absorption, the I-78/81 Corridor continued to be the focus of demand, accounting for nearly 70 percent of this past quarter’s gains,” CBRE said of the fourth quarter.
Central Pennsylvania remains the largest industrial submarket in the state. The inventory of industrial real estate in the area, which includes Cumberland, Dauphin, Franklin, Lancaster, Lebanon and York counties, stood at 162 million square feet at the end of the fourth quarter.
By comparison, the Lehigh Valley has about 74.2 million square feet of industrial real estate. The Lehigh Valley produced record rents in the fourth quarter with an average rate of $4.70 per square foot, up from $4.63 in the third quarter.
CBRE has said the demand for space in the Lehigh Valley is driven largely by companies that need access to New York City. Warehouse developers typically target the midstate and Lehigh Valley because of lower land and staffing costs compared with New Jersey.