The main culprit was ThyssenKrupp Bud Co., an automobile replacement parts manufacturer, which closed its 1.4-million-sf operations in North Philadelphia. In all, "the lights went out in approximately 3.2 million sf last year as companies consolidated their space locally or moved out of the region completely," Guerrieri says. As a result, standard industrial asking rents slipped throughout the year, finishing, on average, at $4.47 per sf, triple net, down $0.49 per sf from their most recent peak in second quarter 2002.

Guerrieri expects rents to hold firm this year as the economy improves. Construction came to a halt in the nine-county Philadelphia region, but demand has picked up in two outlying areas: central Pennsylvania and the Lehigh Valley. By year-end an aggregate of 3.5 million sf of construction was under way in those markets.

Even though the region's industrial market posted one of the worst quarters across the US (in 2003), Guerrieri notes that this metro area has historically been at par or slightly better than the nation at large and predicts, "the Philadelphia region's industrial market will rebound to more historical growth measures in the latter months of 2004."

Further evidence comes from a survey by the Federal Reserve Bank of Philadelphia, which states, "area manufacturers report continuing gains in activity," and "order backlogs have been moving up at a modest, steady rate for the past several months."