RESEARCH

1Q11
Philadelphia Industrial Market

The first quarter of 2011 was a positive one for the Philadelphia industrial Figure 1
Weighted Average Asking Rent & Vacancy
market. The vacancy rate contracted to 12.3%, down from 12.7% recorded
in the fourth quarter of 2010 and 13.6% posted one year ago. After steadily $4.12 14.0%
declining from $4.40/sf in early 2009, the average asking rent climbed a
bit to $4.00/sf in the first quarter of 2011 from the $3.99/sf reported for $4.08 13.5%
year end 2010. Total net absorption was positive in the Philadelphia
$4.04 13.0%
industrial market for the fourth consecutive quarter, at 2.0 million square
feet in the first quarter of 2011. 139,610 square feet of new industrial space
$4.00 12.5%
was delivered to the market this quarter, with 1.4 million square feet
coming through the pipeline. $3.96 12.0%

Central Philadelphia saw the vacancy rate drop to 9.8% in the first quarter $3.92 11.5%
1Q10 2Q10 3Q10 4Q10 1Q11
from 10.2% in the previous quarter, down from 11.8% one year ago.
Average asking rent rose to $3.73/sf this quarter from $3.68/sf in the Rent (Price/SF) Vacancy (%)

fourth quarter of 2010, although remaining down from $3.75/sf recorded

one year ago. The submarket experienced positive net absorption in the Figure 2
first quarter of 2011 with 697,556 square feet picked up, marking the sixth Net Absorption (SF)
straight period of quarterly positive net absorption.
3,600,000

2,400,000
Table 1
Key Indicators
1,200,000
Total Inventory (SF) 545,199,136
Average Asking Rent (Price/SF) Total $4.00 0

Direct $4.00
-1,200,000
Sublet $3.98
Vacancy Rate (%) Total 12.3% -2,400,000
1Q10 2Q10 3Q10 4Q10 1Q11
Direct 11.8%
Sublet 0.5%
Figure 3
Net Absorption (SF) 1Q11 1,996,244 Newmark Knight Frank ModernTrax™ Forecast
4Q10 3,243,138
$4.08
3Q10 650,112
$4.05
Under Construction (SF) 1,369,190

$4.02

Table 2 $3.99
Year Over Year
$3.96
1Q10 1Q11 % Change
Vacancy Rate (%) 13.6% 12.3% -9.5% $3.93
2Q10 3Q10 4Q10 1Q11 2Q11
Average Asking Rent (Price/SF) $4.08 $4.00 -2.0%
Actual Rent (Price/SF) Forecasted Rent (Price/SF)
1Q11
Philadelphia
Industrial market
The U.S. Bureau of Labor Statistics reported that the unemployment rate Figure 5
for the Philadelphia metropolitan area was 8.4% in February 2011, down Consumer Price Index, 12-Month % Change
from 9.3% reported in February 2010. Total nonfarm employment in the 4.8%
area grew 1.2% for the 12 months ending in February 2011, indicating a
gain of 22,500 jobs. The BLS also reported that the Consumer Price Index 3.6%
for the Philadelphia metro area rose 1.9% for the 12 months ending in
2.4%
February 2011.

1.2%
According to the Bureau of Labor Statistics, for the U.S. overall, 1.2
million jobs were gained in the 12 months ending in February, while 0.0%
194,000 jobs were gained during the month. The unemployment rate for
the U.S. overall was 8.9% at the end of February 2011, down from 9.0% -1.2%
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11
in January 2011, and was down from the 9.7% rate reported in February of
2011. The CPI for the U.S. overall was up 2.2% over the last 12 months. United States Philadelphia

Figure 4 Figure 6
Total Nonfarm Employment, 12-Month % Change Unemployment Rate

3.0% 11.0%

1.5% 8.8%

0.0% 6.6%

-1.5% 4.4%

-3.0% 2.2%

-4.5% 0.0%
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11
United States Philadelphia United States Philadelphia

Table 3
Select Lease Transactions

Tenant Address Submarket Square Feet

Domtar Paper 16 E Cabot Blvd Philadelphia Suburban 299,000
Sleep Factory 3800 Frankford Ave Philadelphia North 132,000
PSI Group 2251 Cabot Blvd W Philadelphia Suburban 104,074
Roberts Filter Group 180 Waterworks Rd Philadelphia Suburban 63,150
Walmart 2705 Clemens Rd Philadelphia Suburban 50,000

Table 4
Select Sales Transactions

Address Submarket Square Feet Sale Price Price/SF

2834 Schoeneck Rd Lehigh Valley 270,000 $11,100,000 $41
1109 Commerce Blvd Southern New Jersey 259,910 $9,096,850 $35
1109 Commerce Blvd Southern New Jersey 259,910 $8,810,000 $34
34 E Main St Central Pennsylvania 179,200 $3,650,000 $20
180 Greenfield Rd Central Pennsylvania 136,542 $3,700,000 $27

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www.newmarkkf.com

Table 5
Submarket Statistics

Total Qtrly Net Direct Sublet Total Direct Avg. Sublet Avg. Total Avg.
Inventory Absorption Vacancy Vacancy Vacancy Asking Rent Asking Rent Asking Rent
(SF) (SF) Rate Rate Rate (Price/SF) (Price/SF) (Price/SF)

Central Pennsylvania 156,190,064 697,556 9.6% 0.2% 9.8% $3.75 $3.39 $3.73
Delaware 28,368,360 117,000 11.4% 0.5% 11.9% $4.06 $3.39 $4.04
I-81 Corridor 61,284,386 -72,603 10.8% 0.8% 11.6% $2.98 $2.75 $2.96
Lehigh Valley 65,226,224 347,208 14.5% 1.8% 16.3% $3.99 $4.56 $4.02
Philadelphia North 44,862,536 206,555 14.6% 0.1% 14.7% $4.25 $4.21 $4.25
Philadelphia Southwest 14,250,895 144,110 15.7% 0.0% 15.7% $5.64 NA $5.64
Philadelphia Suburban 102,193,557 431,220 11.8% 0.1% 11.9% $4.68 $5.23 $4.70
Southern New Jersey 72,823,114 125,198 12.7% 0.7% 13.4% $3.75 $4.41 $3.79
Philadelphia 545,199,136 1,996,244 11.8% 0.5% 12.3% $4.00 $3.98 $4.00

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RESEARCH

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Dan Appel
Research Analyst Newmark Knight Frank Research Reports are also available at www.newmarkkf.com/research.

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