Analysts See Strong Warehouse Demand Despite Varied Concerns

Leasing and sales of distribution centers and other industrial properties reached records across the country last year, signaling strengthening demand in the national and Philadelphia commercial real estate markets as shoppers accelerate their shift to buying online.

Industrial activity was robust for a ninth-straight year in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – as overall economic growth and goods consumption drove unprecedented warehouse sales and leasing across the United States in 2018. The data, however, shows some signs pointing to slower growth this year.

This Co-Star report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

Investors, meanwhile, continue to pile into industrial space given its strong and consistent occupancy, rent growth, and return on investment. Total sales volume involving U.S. and Philadelphia commercial real estate listings tipped the $100 billion mark in 2018, the highest on record, and industrial sale prices rose about 10 percent over the prior year, an impressive feat this late in the economic cycle and easily the largest increase of all the major property types.

CoStar’s forecast expects new logistics buildings will be completed at a record pace this year as developers try to capture the demand. The research firm is tracking about 275 million square feet of industrial space under construction, equal to about 1.7 percent of the nation’s total supply. That amount of development among national and Philadelphia commercial real estate properties translates into what’s likely to be a high-water mark for new warehouse and distribution building this year to support the delivery of goods to households shopping online.

That’s a change from last year when the amount of new industrial space in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – dipped 11 percent in 2018 from the prior year. Construction finished the year on the upswing, but even that still may be insufficient to meet demand as more retailers move onto online platforms that require more warehouse space.

White demand remains robust, CoStar predicts the vacancy rate among national and Philadelphia commercial real estate listings will gradually rise and rent growth will slow as developers finish new buildings, more space hits the market, and the beneficial effects of tax cuts and fiscal stimulus begin to diminish and cool the economy.

For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

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