T
he I-78/I-80 corridor, spanning markets in the Lehigh Valley, Central Pennsylvania, and Northeastern Pennsylvania, has seen a notable increase in subleasing activity as the Industrial vacancy rate continues to rise through the first half of 2024. According to Joe Gibson, director of research for CBRE's Philadelphia office, this uptick is largely due to companies rushing to secure industrial space during the COVID-19 pandemic.

    As demand was high and space was scarce, many businesses took larger spaces than needed, only to find they required less space than anticipated after the pandemic subsided. This has led to a significant increase in sublease availability, with third-party logistics companies accounting for nearly 75% of all sublease vacancy added this quarter.

    However, despite rising vacancy rates, new construction projects remain relatively low, with just 2 million square feet breaking ground in the Northeast region. Gibson attributes this discipline among developers to a cautious approach in the face of increasing vacancy.

    While demand may continue to soften, the market is not poised to add excess supply through construction in the near term. This could lead to better bargains for potential tenants on rent, but Gibson doesn't expect drastic changes. The current vacancy rate remains lower than during the 2008-2009 recession and higher than the post-COVID era, indicating a strong market overall.