Northeast U.S. Logistics & Industrial Construction Watch Q1 2023

The Northeast I&L development pipeline declined in the first quarter of 2023 due to a high number of construction completions. The combined Philadelphia Metro and PA I-78/I-81 Corridor markets have 34.3 million sq. ft. under construction after 13.2 million sq. ft. of new product delivered. In comparison, the Tristate markets have a combined 17.2 million sq. ft. under construction and saw total deliveries of 2.9 million sq. ft. Boston construction deliveries pushed the total construction completions in the Northeast to 16.3 million sq. ft. Pre-leasing rates declined to 20.7%, down from 24.2% in Q4 2022. Declining pre-lease rates, rising vacancy, an increase in sublease space, and local pushback from municipalities shrunk the construction pipeline. The average vacancy rate for the Northeast climbed 30 basis points (bps) quarter-over-quarter to 3.8% in Q1 2023. This did not prevent average asking rents from increasing 2.9% quarter-over-quarter to $14.13 per sq. ft.