2023 North America Industrial Big Box Review & Outlook: Southern New Jersey/Eastern Pennsylvania

The region’s approximately 165,000-person warehouse labor force is expected to grow by 5% by 2032, according to CBRE Labor Analytics. A non-supervisory warehouse worker’s average wage is $17.77 per hour, 5% above the national average but 10% below Northern-Central New Jersey.

Figure 2: Southern New Jersey/Eastern Pennsylvania Warehouse & Storage Labor Fundamentals

Source: CBRE Labor Analytics, Q4 2022.
*Median wage (1 year experience); non-supervisory warehouse material handlers.

Location Incentives

Over the past five years, there have been 361 publicly known economic incentives deals totaling over $438 million for an average of $10,198 per new job in metro Philadelphia, according to Wavteq.

CBRE’s Location Incentives Group reports that top incentive programs offered in Pennsylvania include the Job Creation Tax Credit (JCTC), offering tax credits to companies that create at least 25 new jobs or expand existing employment by 25%. The credit ranges from $1,000- $3,000 per employee for each new job created.

Another incentive program in New Jersey is the Emerge Program. Enacted under the Economic Recovery Act of 2020, this replaces the Grow NJ program that sunsets March 1, 2027. This program provides state corporate income tax credits for new and retained jobs for up to seven years. Target industries must create at least 25 net new full-time jobs, and non-targeted industries must create at least 35 net new full-time jobs.

Figure 3: Southern New Jersey/Eastern Pennsylvania Top Incentive Programs

Source: CBRE Location Incentives Group, Q4 2022.
Note: The extent, if any, of state and local incentive offerings depends on location and scope of the operation.

Logistics Driver

The region is centrally located along the East Coast, with access to three major ports: the Port of New York and New Jersey, the Port of Baltimore and the Port of Philadelphia. Two Class 1 railroads serve the region: Norfolk Southern and CSX. Approximately 100 major interstate interchanges are located within the region. The area has direct access to several international airports, making it one of the country’s top air cargo markets. Lehigh Valley International was ranked one of the fastest-growing cargo airports in the U.S. by Airports Council International.

Lehigh Valley International was ranked one of the fastest-growing cargo airports in the U.S. by Airports Council International.

Supply & Demand

With 493 million sq. ft. of total inventory, Southern New Jersey/Eastern Pennsylvania is the second-largest big-box region in North America. Just over 28 million sq. ft. was absorbed in 2022 and nearly 34 million sq. ft. completed construction. With supply and demand remaining near par, the direct vacancy rate stayed at 4% for the second consecutive year, 260 bps lower than in 2020. Low vacancy rates drove up first-year base rents to $7.09 PSF per month for leases 200,000 sq. ft. and larger, 15.9% above 2021’s average.

Low vacancy rates and high rent growth kept developers bullish. 45 million sq. ft. was under construction at year-end, the second most in North America, with only 18.3% pre-leased. The significant volume of completions slated for 2023 will increase vacancy rates, although solid demand will keep the rate from reaching 2020’s level. While the post-peak pandemic rush to lease space will slow, this market remains top-positioned for occupiers in 2023. This is due to its available modern facilities, proximity to ports of entry and large population base.

Figure 4: Share of 2022 Leasing by Occupier Type

Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.

Figure 5: Lease Transaction Volume by Size Range

Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.

Figure 6: 2022 Construction Completions vs. Overall Net Absorption by Size Range

Source: CBRE Research, 2022.

Figure 7: Direct Vacancy Rate by Size Range

Source: CBRE Research, 2022.

Figure 8: Under Construction & Percentage Preleased

Source: CBRE Research, 2022.

Figure 9: First Year Taking Rents (psf/yr)

Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research, 2022.