Market returning to supply demand balance
The PA I-78/I-81 Corridor faced supply constraints in 2015 and 2016. Pent-up demand continued to grow following the post-recession era and start of the e-commerce boom. Overwhelming demand led developers to break ground on speculative projects without hesitation. As of today, buildings constructed in 2015 and 2016 posted vacancy rates at 6.7% and 9.0%, respectively, compared to buildings that completed construction in 2017 and year-to-date 2018 where vacancy sat at 40.6% and 47.9%, respectively. The recent decline in pre-leased new construction is not pointing toward diminished demand. Instead, the vacancy rates point to the fact that the market is returning to a supply-demand balance, and the lease-up time for speculative projects lengthened. With demand growth well in place, newer space will be absorbed.