"New construction activity is almost exclusively driven by build-to-suit projects," he adds, "with the exception of two speculative developments in the Lehigh Valley totaling 800,000 sf." The vacancy level throughout the area remains in single digits at an overall average just below 9.6%. The highest, nearly 13.4%, is in the Lehigh Valley, and the lowest, approximately 5.8%, is in Delaware County.

"This return to end-of-year 2003 vacancy levels is a clear indication of consistency of the Philadelphia industrial market," Rudzinski says. "It also reflects the lack of significant growth in the market." He credits the nearly constant vacancy rate to a general lack of construction in the face of slow economic growth. "Expect a lag period in the industrial real estate market following a full economic recovery as companies will simply employ their excess space," he predicts.

Average asking rental rates also remained almost constant during second quarter, up just a penny from first quarter, to $3.99 per sf for warehouse properties. Although overall rates have stabilized this year, the overall rates are significantly lower than they were a year ago, according to CBRE data.

At $4.16 per sf, Bucks County held the highest average asking minimum rate at mid-year. The lowest of the Pennsylvania counties was $3.89 per sf in New Castle County, somewhat above the lowest in the entire region, which was $3.61 per sf in Camden County, NJ.