New construction contends with slowing tenant demand
Weak tenant demand hindered the removal of new speculative space from the market. Vacancy in the Pennsylvania I-81/78 Corridor increased for the seventh consecutive quarter. The overall vacancy rate rose 30 basis points (bps) from the first quarter of 2024 to 6.5%. Vacancy in the Central PA submarket increased 50 bps to 5.6%, Northeast PA’s vacancy rate rose 30 bps to 7.5%, and Lehigh Valley’s vacancy posted a 10-bps uptick to 7.3%.
The amount of new warehouse space under construction declined compared to one year ago. There is 13.6 million square feet (msf) of new inventory under construction compared to 16.8 msf reported at mid-year 2023. Northeast PA has the largest amount of square footage under construction (5.9 msf), followed by the Central PA submarket with 4.5 msf.