Pennsylvania I-78/I-81 Industrial Corridor, Q2 2017

Demand for new construction

fueling continued development
4.79 Million sq. ft. 5.8% $4.30 15.4 Million sq. ft.

Figure 1: Industrial Net Absorption in Existing vs. New Construction *Arrows indicate change from previous quarter

8
Million sq. ft.

-2
Q2 2014 Q4 2014 Q2 2015 Q4 2015 Q2 2016 Q4 2016 Q2 2017
Existing Supply New Construction
(Built since 2014)
Source: CBRE Research, Q2 2017

Vacancy continues to hover around the 6.0% mark

as demand continues to take down new supply.
Specifically, Class A logistics vacancy within the
Lehigh Valley sits at just 5.4%, a testament to that
submarkets sought-after status among the I-78/81
Corridor submarkets.
Average asking rents in the I-78/I-81 Corridor
stalled, slipping $0.07 to $4.30 PSF/Yr., NNN. But,
this belies the overall trend of rising rents for newer
construction which tends to lease up ahead of
completion. In the Lehigh Valley, new warehouse is
leasing in the mid-to-high $5.00 range and high
$4.00 range in Central PA.
Construction pushes westward as developable land
in the Lehigh Valley grows scarce. Specifically,
Dermody Properties just broke ground on a 1+
million sq. ft. speculative project in Bethel, PA, at exit
16 of I-78 just miles away from the I-78/I-81 split.
Investment sales are keeping pace with 2016 levels,
portending another robust year of investment interest
provide sales opportunities exist.

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 PENNSYLVANIA I-78/I-81 INDUSTRIAL CORRIDOR

Figure 2: Industrial Market Statistics for All Properties Greater than 100,000 sq. ft.

Total Under 2017 YTD Total Avg. Asking

Total
Submarket Inventory Availability Rate Completions Construction Net Absorption Lease Rate
Vacancy Rate (%)
(SF) (%) (SF) (SF) (SF) ($NNN/PSF/YR)
Cumberland County, PA 51,118,941 10.1 12.0 1,617,228 3,105,600 614,686 4.58

Dauphin County, PA 13,961,186 4.8 7.4 0 0 503,653 3.86

Franklin County, PA 11,831,160 6.3 8.2 0 1,100,000 -500,000 4.52

Lancaster County, PA 34,791,334 1.5 1.8 0 0 1,187 4.08

Lebanon County, PA 6,625,984 15.7 15.7 0 1,002,000 1,080,421 4.37

York County, PA 45,973,180 3.6 6.4 0 895,000 562,829 3.95

Central PA Subtotal 164,301,785 6.0 7.8 1,617,228 6,102,600 2,271,776 4.34

Berks County, PA 18,061,542 5.0 6.0 0 1,913,200 -294,509 3.59

Lehigh County, PA 38,903,411 3.7 5.2 413,750 2,636,000 732,051 4.69

Northampton County, PA 17,580,257 6.8 6.8 594,000 2,240,527 985,000 4.95

Lehigh Valley PA Subtotal 74,545,210 4.8 5.8 1,007,750 6,789,727 1,422,542 4.61

Lackawanna County, PA 12,203,547 14.3 15.7 0 0 39,101 3.26

Luzerne County, PA 29,322,688 6.3 7.6 645,504 2,531,160 210,757 3.85

Monroe County, PA 3,539,901 0.4 1.3 0 0 0 $4.00

Schuylkill County, PA 7,234,772 0 0 0 0 853,492 ------

Northeast PA Subtotal 52,300,908 6.9 8.0 645,504 2,531,160 1,103,350 3.51

TOTAL 291,147,903 5.8 7.3 3,270,482 15,423,487 4,788,668 4.30

Source: CBRE Research, Q2 2017.

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 PENNSYLVANIA I-78/I-81 INDUSTRIAL CORRIDOR

ABSORPTION Figure 3: Net Absorption

Million sq. ft.

4

0
Q2 2015 Q4 2015 Q2 2016 Q4 2016 Q2 2017

Source: CBRE Research, Q2 2017.

VACANCY Figure 4: Vacancy Rate

(%) 7.5
7.0

6.5

6.0

5.5

5.0

4.5
Q2 2015 Q4 2015 Q2 2016 Q4 2016 Q2 2017

Source: CBRE Research, Q2 2017.

DEVELOPMENT PIPELINE Figure 5: Completions

20
Million sq. ft.

16

12

0
2009 2011 2013 2015 2017

Source: CBRE Research, Q2 2017.

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 PENNSYLVANIA I-78/I-81 INDUSTRIAL CORRIDOR

LEASE RATES Figure 6: Industrial Lease Rates

4.40

4.20

4.00

3.80

3.60
Q2 2015 Q4 2015 Q2 2016 Q4 2016 Q2 2017

Source: CBRE Research, Q2 2017.

CAPITAL MARKETS
Figure 7: Industrial Sales Transactions
800

($, Millions)
700
600
500
400
300
200
100
0
Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2 2017

Source: Real Capital Analytics (4-Qtr. Aggregate).

ECOMMERCE

Figure 8: Ecommerce vs. Logistics Occupancy

(%) (%)
100 9
95 8
90 7
85 6
80 5
75 4
70 3
2009 2011 2013 2015 Q1 2017
Class A Logistics Occupancy (L)
%Share Ecommerce of Total (R)
Source: Census Bureau.

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