Cushman & Wakefield's Americas Market Beat~ Industrial Philadelphia q32016

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PhiladelphiaIndustrial 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 1612-Month

Forecast

Philadelphia Employment 2,828M 2,883M

Philadelphia Unemployment 5.0% 5.2%

U.S. Unemployment 5.2% 4.9%

Q3 15 Q3 1612-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

EconomyThe 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 OverviewThe 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.

OutlookAlmost 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%

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.

PhiladelphiaIndustrial Q3 2016

SUBMARKETTOTAL

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 485,987Zenith 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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Philadelphia, PA 19103

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