WCRE 4Q Report: Moderate Growth in South Jersey and Philadelphia Markets

EVESHAM TOWNSHIP, NJ—Commercial real estate brokerage WCRE/CORFAC International says the Southern New Jersey and Southeastern Pennsylvania markets continued to show overall solid fundamentals, buoyed by new investments from outside the region and economic inflows to support local expansions. Leasing, sales, net absorption, and prospecting activity all were up in the fourth quarter, WCRE reported in its analysis of the fourth quarter of 2018.

“Although the financial markets were highly unpredictable, commercial real estate performed the way it has for most of the past several years – with steady growth supported by strong fundamentals,” says Jason Wolf, founder and managing principal of WCRE/CORFAC International.

There were approximately 336,466 square feet of new leases and renewals executed in the three counties surveyed (Burlington, Camden and Gloucester), an increase of 18.3% vs. the previous quarter. The sales market stayed active, too, with about 1.4 million square feet on the market or under agreement, while actual sales were active at $28.5 million, totaling approximately 316,476 square feet.

New leasing activity accounted for approximately 36% of all deals for the three counties surveyed. Overall, gross leasing absorption for the fourth quarter was about 286,215 square feet.

Other office market highlights from the report:

• Overall vacancy in the market is now approximately 10.95%, an improvement of 35 basis points over the previous quarter.
• Average rents for class A and B product continue to show strong support in the range of $10.00-$15.00 per square foot, triple-net or $20.00-$25.00 per square foot gross, for the deals completed during the quarter. These averages stayed near this range throughout 2018.
• Vacancy in Camden County increased to 11.5% for the quarter, an improvement of nearly a point compared to the third quarter.
• Burlington County vacancy stayed at 10.4%, unchanged.

Highlights from the fourth quarter in Pennsylvania include:

• The vacancy rate in Philadelphia’s office market was 7.8%, a slight improvement over the previous quarter. Demand for office space continues to be strong.
• Net office space absorption in Philadelphia was 1,224,697 square feet for the quarter.
• The industrial sector is as strong as ever in Philadelphia. The fourth quarter saw a small decrease in vacancy rates, to 5.3%, but a jump of about one million square feet in net absorption quarter over quarter, to 7.1 million square feet.
• Philadelphia retail was the lone true weak spot in Q4. The vacancy rate ticked up two tenths of a point, to 4.5%, while net absorption was negative for the second straight quarter, at -611,261 square feet.

In the Southern New Jersey retail market, the fourth quarter saw the contrast of a spending surge that propelled holiday sales to their best season in six years and at the same time, consumer confidence inching downward as the year ended. The job market has stayed remarkably strong, with low unemployment supporting consumer spending and reverberating through other indicators. Other highlights from the retail section of the report include:

• Retail vacancy in Camden County stood at 7%, with average rents in the range of $16.19 per square foot, triple-net.
• Retail vacancy in Burlington County stood at 6.7%, with average rents in the range of $13.11 per square foot, triple-net.
• Retail vacancy in Gloucester County stood at 8.6%, with average rents in the range of $13.76 per square foot, triple-net.

Correction, 1/16/2019, 2:42 p.m.: WCRE is affiliated with CORFAC International, which describes itself as “an alliance of entrepreneurial commercial real estate firms that partner to deliver quality and experienced service locally, nationally, and internationally.“ An earlier version of this story omitted the company’s CORFAC affiliation.