Outsized rent growth sparks sharp rate increases for occupiers at renewal
March 8, 2022
Industrial rents soared across the Philadelphia Metro and PA I-78/I-81 Corridor markets over the last 5 years as consumer expenditure rose and businesses pushed hard to match supply to consumer demand. The rising rents subjected occupiers relocating and expanding their logistics operations to a fiercely competitive market with a shrinking pool of modern large block supply.
Tenants looking to renew in place faced their own challenge: sharp rental rate increases at renewal. For a typical 5-year lease signed in 2016, tenants renewing in 2021 experienced an average increase of 11.2% at renewal.1 Some tenants in the most coveted submarkets experienced rate hikes over 60% at renewal, a steep increase in real estate costs. Renewal offers were aggressive on price and included shorter windows to execute as, as landlords exercised their leverage to quickly fill spaces with higher paying tenants.