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PHILADELPHIA-Despite one recent trade here, Philadelphia’s industrial market is showing signs that it is leveling off, according to CB Richard Ellis’ Q4 report for the region. Reasons include the completion of several construction projects during the fourth quarter, adding close to two million sf of inventory–a considerable amount of which has already been leased. Meanwhile rising construction, land and entitlement have not yet been reflected in asking lease rates. In coming quarters, rents will either rise or begin to cut into developers’ profits, CBRE concluded.

Other trends pointing to a leveling off: direct vacancy rates inside the Greater Philadelphia industrial market rose 6.9%–up slightly from 6.39% at the close of third quarter 2007. By the close of 2007, its annual positive net absorption figures finished at just over 3.9 million-sf–less than when compared to the same time a year before.

This confluence of factors has led the industry to approach 2008 with a “lie and wait” attitude. “The upcoming year will most likely bring a slow, but steady growth across the industrial properties sector,” says CBRE managing director Carl Gersbach. “However, challenges such as growing construction costs, rising financing costs, higher cap rates and relatively flat rents will certainly have an impact on the marketplace.”

Still, though, the long-term fundamentals for the area remain positive, both anecdotally and quantitatively. The $11.5 million sale of 13500 Roosevelt Blvd., by BlackRock Realty Advisors took place within a 60-day period, according to CBRE, which represented BlackRock. Needham, MA-based Equity Industrial Partners purchased the single tenant assembly/warehouse/office asset. More deals are sure to come to market as well, Stephen Marzullo, SVP of the Investment Properties Group, of the CBRE marketing team handling that deal, which also included Michael Hines, Patrick Green and Michael Mullen. “Our team has experienced an unwavering appetite for industrial throughout this credit crisis,” he says. “Currently, our team is handling an industrial sales pipeline of over 21 million sf of both regional offerings and national portfolios with an aggregate value over $1.1 billion.”

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