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PHILADELPHIA-Industrial activity, including manufacturing and employment, ticked up a notch throughout the MSA during the third-quarter, according to research from the local office of Cushman & Wakefield. As a result, the industrial vacancy rate for the overall MSA fell to 11.7%, down from 12.4% in the previous quarter.

While the drop is a welcome sign, the vacancy rate had been as low as 5.6% in 2000. Sublease space in third-quarter 2003 accounted for 1.8 million sf of overall available space. While that’s just a slight increase from the previous quarter, “absorbing the discarded space continues to impede robust growth,” C&W researchers say.

Philadelphia County experienced the largest decline in vacancy, down from 11.9% in the second quarter to 10%, primarily because some of its less competitive inventory was taken off the market. Overall vacancy in the western suburbs fell from 13.2% in second quarter to 12.5%, largely because of Tyco Healthcare’s 636,000-sf lease for warehouse space along the 422 Corridor.

The average asking rental rates in the MSA dropped slightly across all industrial sectors. The average for manufacturing space slid to $4.11 per sf, compared with $4.25 per sf in the previous quarter; warehouse/distribution rental rates dipped just two cents to an average of $4.44 per sf, and the average at office service properties fell to $8.92 per sf, down from $9.29 per sf in second quarter.

C&W cites data from the Federal Reserve Bank of Philadelphia’s leading index as a positive sign for the remainder of the year. Unemployment fell to 5.2% in August, down from a January high of 6.1%, and the manufacturing sector showed improvement for the fourth straight month. Furthermore, a recent survey, conducted by the bank, indicates that 41% of area manufacturers plan to increase production in fourth quarter.

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