Philadelphia's Commercial Market Forecasted to Flourish

Philadelphia Has Plenty of CRE Property

The City of Brotherly Love is the most populous city in the Keystone State and the sixth-largest city in the U.S. Once a powerhouse fueled by metal manufacturing, Philadelphia’s main commercial appeal today centers on its regional and national distribution centers. The city’s location and proximity to large transit systems could lead it to become the East Coast’s new distribution hub – which is great news for commercial real estate agents.

Philadelphia’s Commercial Growth

In the ‘70s, one in three workers in Philadelphia were employed in manufacturing. Today, those numbers have shifted:

• One in six workers are in the industrial sector
• One in 10 workers are in the manufacturing sector

The industrial sector serves warehousing, logistics, manufacturing, and transportation needs. This sector is the top-performing in the city, generating $1.3 billion in wages annually. The diversification of popular industries translates into greater job opportunities for this dedicated workforce, a key factor in establishing an area as a CRE hotspot. Meanwhile, Philadelphia has been capitalizing on the rise of e-commerce, meeting the increased demand for transportation and infrastructure, thanks in large part to the city’s geographical location.

Sitting between large metropolitan hubs like New York City and Washington, D.C., Philly is more affordable for businesses, advertising lower costs for property and development. The average price per square foot in Philadelphia is $74.93 while the average price per square foot in New York City is $85.56.  

In reference to indicators that a CRE scene will rebound quickly (and fruitfully) post-COVID-19, NAR’s Chief Economist Lawrence Yun said, "The top commercial real estate markets that are expected to outperform the rest of the nation are generally affordable and able to draw new residents with a greater flexibility to work from home." Between its physical location, affordability, and the promise of employment options, Philadelphia's CRE scene is poised to flourish this year – and beyond.

What’s Appealing About Philadelphia?

Location, accessibility, quality workforce, and available job sites are all offered here in Philly, making it a prime spot for workers and companies alike as opportunities abound. Here’s how we stack up in terms of logistics and distribution, calling attention to the city’s current success and growing potential as a major distribution hub:  

• Philadelphia’s population has increased ~2% since 2010, and the metropolitan area population comprises 6.1 million people.
• The greater Philadelphia region produces more than $410 billion in GDP annually.
• There is 14 million sq. ft. of industrial space available for development to meet the demand for distribution space

Investors have recognized the shift occurring in the retail sectors as consumers continue to rely more on e-commerce. Since 2000, the number of online sales in the U.S. has increased 1,500%. In response, companies like Amazon have been adding delivery stations in the Philly area for years, most recently adding four new stations to meet the demand for online sales and shipping products to residential regions. PhilaPort is one more example of development breaking ground to meet distribution needs, adding more than 200,000 sq. ft. of flexible, food-grade storage in a new distribution center. 

2021’s Commercial Real Estate Outlook 

As retail, hotels, and office space prices declined 5–10% over the last year, industrial sectors, data centers, life-science spaces, and rentals all have increased in value. Demand has transitioned to these areas as remote work, travel, and tourism have all influenced the current commercial real estate market.

According to the National Association of REALTORS®, properties or portfolios of at least $2.5 million fell 28% year-over-year in the first quarter of 2021, with declines across all property types except for hotels. Across the country, commercial real estate is slow to make a comeback, as reopening trudges on steadily. Over time and with the right conditions, affordable CRE markets like Philadelphia could take off faster than Gritty chasing a hot dog on Flyers Dollar Dogs Night.

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