Commercial Markets in Southern New Jersey and Philly Post Modest Gains

EVESHAM TOWNSHIP, NJ—Commercial real estate brokerage firm WCRE reports that the Southern New Jersey and Southeastern Pennsylvania commercial real estate markets continued to show modest gains, continued investments, and overall solid fundamentals in the third quarter.

Sales volume and prospecting activity held steady in the third quarter, WCRE states that third quarter leasing activity was higher in Camden County, and particularly in Cherry Hill, but fell for the region overall. Gross leasing absorption was positive, but trended lower quarter-over-quarter.

“We are in a continuing period of a strong economy with low unemployment. This has supported a long streak of slow, steady growth supported by strong fundamentals,” says Jason Wolf, founder and managing principal of WCRE. “Although a given indicator might fluctuate one quarter to the next, commercial real estate in this region remains strong, and there is reason to stay optimistic.”

In the third quarter, the region posted approximately 266,867 square feet of new leases and renewals executed in the three counties surveyed (Burlington, Camden and Gloucester), which was a decrease of 7% compared to the second quarter. The sales market increased, with approximately 1.67 million square feet on the market or under agreement. However, completed sales slowed to approximately 329,769 square feet changing hands, less than half the previous quarter, which had been notably active.

New leasing activity accounted for approximately 36% of all transactions for the three counties surveyed. Overall, gross leasing absorption for the third quarter was in the range 70,000 square feet, down from 150,000 in the second quarter.

Among the other key data points from the WCRE report include:

Overall vacancy in the market was approximately 11.50%, which was a slight uptick from the previous quarter, but was still near a 20-year low.

Average rents for Class A and B product continue to show strong support in the range of $10.00-$15.00-per-square-foot NNN or $20.00-$25.00-per-square-foot gross for the deals completed during the quarter. These averages have hovered near this range for more than a year.

Vacancy in Camden County dropped slightly to 11.1% for the third quarter, back to where it stood in the first quarter.

Burlington County’s vacancy stood at 11.9%, increasing 40 basis points. Burlington’s vacancy rate jumped earlier in the year due to several large blocks of space returning to the market.

The vacancy rate in Philadelphia’s office market dropped slightly to 8.6%, the second consecutive quarter to post a decrease of two tenths of a percent. The office vacancy rate is still near a 20-year low, and below that of comparable major cities, WCRE states in its report.

The industrial sector in Philadelphia remains very strong. The third quarter saw vacancy rates virtually unchanged, at 5.0% while net absorption was constrained by a shrinking volume of available space. Rent growth of 6.0% far exceeded the long-term average of 1.7%.

Philadelphia retail is so far avoiding a major spike in vacancy due to the shift toward e-commerce. Rising wages and low unemployment are fueling retail spending, buoying the CRE market. The vacancy rate inched up to 4.7%, while net absorption was negative 562,000 square feet over the last 12 months.

In terms of the Southern New Jersey retail market, the retail vacancy rate in Camden County jumped to 6.9% from 5.7% in the second quarter, while average rents increased in the range of $17.05-per-square-foot NNN. Retail vacancy in Burlington County ticked up very slightly, to 7.6%, with average rents in the range of $12.68-per-square-foot NNN. Retail vacancy in Gloucester County dropped to 7.4%, with average rents in the range of $13.41-per-square-foot NNN.