The industrial property sector’s lengthy run of historically strong demand and rent gains might work against it a bit as the market proceeds through 2019.
With vacancies now at a historic low of 4.7 percent among U.S. and Philadelphia commercial real estate properties, and construction still not keeping up with demand, the options for tenants to expand are limited. That, experts say, probably will push up rents further.
This could be a problem for nationwide and Philadelphia industrial commercial real estate listings, according industry expert Eric Rehn, who said “an industrial housing crisis is affecting the commercial real estate market and will have a major impact on the ability for our economy to grow.”
Most concerning, Rehn continued, is the lack of entry-level, light industrial incubator buildings in the 1,500-square-foot to 3,000-square-foot unit size range involving U.S. and Philly industrial space. Most vacant industrial space is found in large blocks of high-cube warehouses made in the past few years to support demand for companies like Amazon, rather than smaller, multiple tenant buildings.
This Co-Star Research report involving Philadelphia industrial commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
The speed of the market is changing. The time frame to lease buildings among U.S. and Philadelphia industrial commercial real estate listings has dropped more than 50 percent; it now takes three-and-a-half months to lease, compared to the seven-to-eight-month historical average, according to CoStar data.
This has helped drive rents up from $8.09 per square foot on average at the start of 2016 to $9.32 per square foot at year-end 2018.
“What’s remarkable about the industrial sector is not only the strong rent growth, easily outpacing all the other property types — but also that we’ve not really seen any slowdown,” said John Affleck, vice president and senior economist at CoStar Group.
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