Barreling Ahead Full Steam
Booming Market Growth
Annual market growth for the Eastern PA “big-box” market measured 7.2% in 2016, the largest annualized growth recorded in the current cycle. The Lehigh Valley submarket was the fastest growing of all markets, measuring 13.9%.
Deliveries of “big-box” facilities topped 15 MSF in 2016, a 50% increase over the year-end total for 2015. New construction was predominantly speculative in nature, responsive to continued occupier demand, and driven in large part by e-commerce. Construction starts totaled 13.2 MSF equaling the total observed in 2015.
Vacancy Rates Hold - Despite Increase in New Construction
At year end, the market vacancy rate was 4.99%, which represented a 36 basis point increase above year end 2015. Most of the regional sub-markets remained tight and had year over year reductions in vacancy. 2016 was the third straight year that new construction exceeded absorption. While the disparity was minimal, we expect developers to take a moderated approach in certain sub-markets while waiting to determine the viability of a strengthening future pipeline of occupier requirements.
Strong Occupier Activity
There were 16.4 MSF of occupier transactions in 2016, the most recorded during the current market cycle. In 2016, each of the regional submarkets had more new transactions, in terms of SF, than their respective five year averages for occupier activity. The Lehigh Valley continued to dominate with an annual total of 7.09 MSF. In Northeast PA, the amount of new transactions increased 180% from 1.69 MSF in 2015 to 3.05 MSF.